Most trade ideas I post here run 70-80% probability of profit. And last week I posted a USO call ratio spread at 82% POP. Yesterday it was breached, deep in the money, wrong side. You can't learn management from a trade that never goes against you. At this win rate I only get a few of these a year to practice on. So here's the part that makes everything else obvious. A call ratio is one long call and two short calls. Read it the other way and it's a debit spread plus one naked call. The debit spread looks after itself, at expiration, it delivers its full profit. Every repair works on that one naked contract. The four most of us already run: 1) Roll it up or out (for a credit) 2) Sell a put against it 3) Sell shorter dated puts repeatedly 4) Buy shares or futures for static delta New seven I've never published: 1) Capped ladder 2) Put broken wing instead of a naked put 3) ZEBRA or ZEEHBS in place of shares 4) Jade Lizard conversion 5) LEAPS cover 6) Renting the wing out weekly 7) Taking the assignment on purpose On my position a single 166 call costs about 1,250, the 166/174 vertical costs about 275. Same protection, starting 8 points away instead of 40, and I own nine of them for the price of two calls (that one came out of a research paper published this June). Full breakdown with strikes, payoff diagrams and the live position is on Patreon. When a ratio or a naked call gets breached, do you roll, cap it, or close?

A trade with an 82% probability of profit and unlimited risk. Both of those are true about the position I put on this morning. Most traders only ever read the first number. What saves you is a management plan written before the trade goes against you, and mine was written before I clicked. I also built a second version that caps the loss and cuts the buying power by 45%. Both versions, all the numbers, and the exact plan, in today's article

I sold a Big Lizard in DRAM this morning, and no matter how high it goes, I still get paid. DRAM went zero to $10B in 7 weeks, a pace only the biggest Bitcoin and gold launches have matched. I went through the holdings file: 3 companies are 70% of this memory chip fund, and it's paying 74.6% implied volatility. Almost nobody trades a Big Lizard. Full trade structure in today's article

Many people here trade options on leveraged ETFs. I simulated TQQQ back to QQQ's inception in March 1999, with financing costs and the fund's expense ratio built into the model. Almost every leveraged ETF discussion eventually runs into assumption 3x daily leverage should produce something close to 3x the long-term return. The pre-2010 series models 3x daily exposure to QQQ, with financing costs on the borrowed notional and the fund's expense ratio subtracted daily. Starting in 2010, the simulated series is spliced directly into TQQQ's real, traded adjusted price history, so everything after that point comes from actual market data. The results, $10,000 invested in March 1999: - QQQ: $10,000 → $167,265 (11% annualized) - TQQQ (simulated pre-2010, real data after): $10,000 → $24,569 (3.4% annualized) Maximum drawdown over the same 27 years: - QQQ: -82.96% - TQQQ: -99.98% A -99.98% drawdown means every $10,000 fell to $2. TQQQ carried far more risk the entire way and still finished with $14,569 in total profit against QQQ's $157,265, under 10% of the unleveraged return. The volatility drag (beta slippage) scales with the square of the leverage multiple. So double the leverage and the drag roughly quadruples, triple it and the drag runs close to nine times larger. That is why I don't trade options on leveraged ETFs. You would be layering theta and IV risk on top of an instrument that is already decaying by design and has never been tested by the environment that would break it.

Just started the 14 day free trial. There's a lot of strategies that it screens to find a trade that meets your criteria. The details are impressive.