On March 31st, I attended a seminar sponsored by Tasty Trade Inc.
based in Chicago, Illinois. The seminar setting was in Pepperdine University
Even though I mostly know the materials but I decided to go 'cause I
believe I will always learn something new by associating myself with
different trading perspectives and experiences. Most of my Wall Street
Sweepers Trading Club members also go to this seminar. Besides, I haven't
been to Pepperdine University in Malibu. I consider this is an excellent
chance for me to see the university myself.
I left my Claremont
house in the early morning. I don't want to be late for any stock seminar
which is one of my favorite events. By the time I got to Pepperdine University, the register table was
already set up. Coffee, tea, lunch and beverages were provided. I
consider this is a very generous part from Tasty Trade Inc. since the
seminar itself is free of charge.
Mr. Tom Sonnoff, the founder of Tasty
Trade Inc. is a spectator in this event. He invites 5 geeks to speak on
various subjects of stock, option and futures.
The first speaker was Dr. Michael Rechentin,
aka Dr. Data, talked about the general concepts of option data science.
He mentioned about option pricing calculators and some of his research
breaks down. He has a website for us to explore just in case we want to
know more about the subjects in his speech.
Mr. Jacob Perlman and Dr. James Schultz talked about option math
and distribution statistics respectively. They went through various math
models and calculus of option pricing formulas with some math symbols
such as delta, sigma, derivative and integral, to name a few. From
the statistics presentation, bell shape, standard variation, binomial, poisson and normal distribution are also mentioned.
Honestly speaking, I am not very interested in this subject 'cause I
believe on a race track, the best drivers will
win the race, not the best mechanics.
Mr. Thomas Preston mainly talked about the volatility of option and
how it affects the option price. He mentioned about skew in volatility to
explain why same probability of OTM call and put have different prices.
From his speech, I realize he is an option seller just like me.
Dr. Pete Mulmat is a futures specialist.
He mainly talked about futures, a product that I don't understand and
don't trade but his speech got my most attention simply because we have
similar trading strategy. He talked about simplicity and market
neutralization using one long one short pair trading strategy. That is
exactly the way I am trading my portfolio right now. Since I am not
familiar with futures products, I don't know exactly how he makes money
pair trading futures, but for me, I make money by selling OTM put, and
occasionally selling vertical puts of the pairs to release pressure from
capital requirements for my portfolio. When a stock is put to me, I sell
ATM covered call. The one long one short pair trading will stabilize my
stock value while I am collecting option premiums. My strategy doesn't
guarantee profit, no strategy does. It guarantees only one stock, but not
both, will be assigned to me if the stocks drop below my short put strike
price. It also guarantees for every stock assigned to me, I collect two
option premiums for it. When the stock is assigned to me, I have to
figure out a way to stabilize my stock value. There is no perfect way to
do it since we are not living in a perfect world but it is doable with
common sense, simple math and search for suitable one long one short
pairs. The ideal pairs are the ones with high volatility so we can
collect the most option premium when selling it.
Mr. Tom Sonnoff is not a speaker in this
event, but between formal speakers, he talked about his personal trading
experiences. He never worries about market movement and his portfolio
performance 'cause he has confidence in his trading strategies. He is
basically a contrarian probability trader and will find a trade with more
than 50% probability of profit (POP) in any given
market condition. With over 50% POP in every trade, it is just a matter
of time until his portfolio outperforms the general market. His main
trading techniques are POP and mechanical adjustments for trades don't go
his way. He also mentioned about time decay in his trading. Since time
decay is calculated based on calendar day, not trading day, it will work
for option sellers 365 days per year. That is a big plus if we know how
to capitalize time decay in option trading.
After attending this seminar, I notice one common point in all
Tasty Trade speakers: They make their trades based on POP and let time
decay work hard for them. Stock traders simply have a 50/50 chance after
they buy a stock and wait for it to go up for profit. Option traders can
choose a strategy to improve their POP. On top of it, option traders have
protection; stock traders don't.
Speaking of Pepperdine University, it situates on a nice piece of real
estate in Malibu
with excellent view from top of the hill. I truly enjoy my first visit of
the university. I don't mind to go there again for my next seminar.