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Tom & RTers:
I too have had mailings from Don Fishback. What a moron! Worse, what a public menace!
First off there's a mailing for a trading approach that succeeds over 90% of the time (where have I heard that before?). He's asking several thousnds of $$$$ for that. A few weeks later, I see advertised his "Options for Beginners" book for $14.95, with a special offer guide to trading that elsewhere would have cost thousands of $$$.
For $14.95 I satisfied my curiosity. His failsafe system? Get ready for this:
* the market will supposedly trade within a 2 standard deviation bound (based on historical volatility) 95% of the time. (this is an absolute lie. Anyone with Tradestation can run the data for themselves an see the market exceed these 2 sigma bounds MUCH more frequently than 5% of the time, normal distribution simply doesn't apply).
* therefore novice traders should sell naked strangles at 2 standard deviations out of the money. (Even if the market exceeds 2 SDs only 5% of the time, that 5% will wipe out the novice trader who does not know how to adjust).
* if you're a little more conservative, you should buy the wings, i.e., buy options one extra strike price out of the money. (The resulting credit will in most cases not equal the commissions, fees and slippage cost for establishing this position. Remember now, he's advocating 4 options per position for a typical credit of around $125 with 30 days to expiration. So you take in $5 - 10 if you're lucky, to carry a maximum risk of $1,250. What a moron!)
The reason this gets me so upset is that I was a novice once too. There are going to be people who get taken by this crook, spend their thousands of hard earned $$$$, get NOTHING they can use, and maybe even lose it all. This is an industry in serious need of regulation!
At the very least, Eddie Kwong might think of establishing somewhere on the RT website that warns the public about rip off traders. Maybe just posts like these, so he can avoid all the libel cases!
This ends today's sermon.
- Stuart
>>> "Tom Alexander" <gta3@xxxxxxxxxxxxx> 07/14 10:43 AM >>>
I haven't read the book but based on Walt's review there seems to be far
more information that could lead a trader to ruin than could put one on the
road to success. This reminds me of the spam I received a day or two ago
from Don Fishback claiming some ridiculous rate of return by following some
system he was hawking (no doubt selling out of the money options).
This stuff makes a ton of money - for the purveyor of the trash. It will
never go away because of the P.T. Barnum effect, which when applied to
trading should be restated as, "there are dozens and dozens of suckers born
every minute".
There will always be a ready supply of junk for those looking for the easy
answer. Just use a tiny bit of logic before biting on this stuff and a lot
of time, anguish, and money will have been saved.
Regards,
Tom Alexander
----------
> From: Walt Downs <knight@xxxxxxxxxxxx>
> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Subject: TRD GEN: Book review: Jon Schiller's "100%" Option Strategy
> Date: Tuesday, July 14, 1998 6:08 AM
>
> RT's,
>
> Here's a few thoughts on Jon Schiller's book, "The 100% Return
> Options Trading Strategy".
>
> Some interesting ideas on OEX trading can be found in this book.
> However, Schiller does "candy coat" some of the concepts, and
> some of the data in the book is contradictory or a bit misleading.
>
> In the case of the CVSS covered write options strangle, Jon would
> have you believe that they are safe as CD's. Not necessarily. On
> page 152, Jon paints a rosy picture of exponential returns, enabling
> the trader to turn $5,000 dollars into $89,623 over a 36 month
> period. Whoops! Take a closer look: This run is based on Gaussian
> probability and *assumes* a 90% winning percentile based on a
> 2 Sigma SD distibution. In real trading, it is very likely that these
> levels will hold up no more than 70% of the time. (This is in line
> with statistical evidence that markets trend strongly about 30% of
> the time.)
>
> As an example, please view the spread sheet given on Page 88
> I was a bit suprised, as Jon claimed that only 5 of the losing
> positions would have incurred max loss. Looks to me like *11*
> of the losers would have incurred max loss, as they consumed
> or eclipsed the entire 5 point spread of the short and long calls.
>
> This means corrective action would have had to have been taken in
> all instances. A different result from what Jon claims on pages 78
> and 80. In simplistic terms the end result of
> the trading term would have been:
>
> Based on 1.82 differential in risk/reward (For every 100.00 you make
> you lose 182.00)
>
> 33 trades/12 losers/21 winners = W/L Ratio: 63% (told you)
>
> 12 x 182 = (2184)
> 21 x 100 = 2100
> Total Loss/Gain = (100)
>
> We can of course assume that the trader would take action to
> prevent the maximum loss, so he actually would have made
> money. However, I don't think 100% returns are as simple as
> Jon states.
>
> As far as Jon's day trading Delta strategy, the description was
> awfully simplistic. "Just watch the little RSI thingy, and when it
> turns you can buy or sell, or just jump in when you see the big
> programs buy or sell". To me, this can be equated to telling
> someone to just "Buy low and Sell High". It isn't quite that
> easy.
>
> The thing that bothered me most about the book, was the fact that
> nowhere was volatility mentioned. Volatility is the cornerstone of
> the option trader. Without a firm grasp of its use, and a few trusty
> vol indicators that work, an option guy can be in *real* trouble
> very quickly.
>
> Some of the ideas and practical trading info were good though. Mark
> Jon Schiller's book as a place to *start* your learning process of
> OEX trading. You will have to do a lot more reading if you want to
> trade the OEX profitably. It's probably worth 50 bucks, but it's no
> Holy Grail.
>
> Walt Downs
> CIS Trading
>
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