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Discussion in 'Options' started by jim, May 4, 2016.

  1. jim

    jim Administrator Staff Member

    I have had several member ask me about my Kevlar Trade. Several of the question go like this:
    When I go to the Kevlar page, it only lists performance for Dec and Jan, are there any updates? Will your service educate me on how to put on and manage these trades, or are they geared towards a more advanced investor? Are other Butterfly strategy a pre requisite to understand your trades? And finally, after some time with your service, will I be able to duplicate your concepts on my own such as when and how to put on the Kevlar 1 or 2, or are they proprietary systems?
    Here is some information that you should know about the Kevlar:
    I have uploaded (see attached file) the current Trade History (performance) of my Kevlar Trade as of today 5/3/216. We have six close trades (all winners for a total gain of 37%) and two open trades (one up over 4% and one opened today which is slightly positive).

    Knowledge any other Butterfly strategy is NOT a pre-requisite to trade the Kevlar trade. It is important to note that the Kevlar has to different modes of entering a new trade. The entry mode is determined by the SPX's implied volatility and the PUT SKEW. Consider our currents to open Kevlar trades (JUN and JUL). The June Kevlar trade used a symmetrical 100 point wing PUTs butterfly, with a long deep in the money CALL, while our July Kevlar used a broken wing butterfly with a 100 points lower wing and a 75 point upper wing.

    I began development on the Kevlar butterfly seven years ago. After years of research, back testing, volatility modeling, methodology analysis and consultation from several friends who I consider to be excellent traders, such as John Locke, Dan Harvey, Steven Chanin, Paul Demers and many other traders (from Goldman Sachs, floor traders, risk managers, hedge fund managers, etc.), my Kevlar butterfly has grown into a multi-mode entry and dynamically risk managed, well hedged trade that can handle most types of market environments.

    Jim Riggio

    Attached Files:

  2. jim

    jim Administrator Staff Member

    Tom Nunamaker has updated the Kevlar history (performance) information. Everyone can now access the Kevlar history (Performance) through the "Kevlar landing page" through this link:

    Jim Riggio
    Chuck likes this.
  3. status1

    status1 Well-Known Member

    Is that history (performance) sheet available to use off line ?
    In other words is that available or something similar that I or anyone else can use to track the performance of my trades ?
  4. N N

    N N Well-Known Member

    Can you post the last 7 years of performance as well? I think having a bigger sample through multiple market cycles would be extremely beneficial!
  5. jim

    jim Administrator Staff Member

    No. I will not provide any previous performance information, nor am I making any claim of that previous performance.

    I was Registered Investment Advisory Representative (registered with the SEC) before Tom and I started Capital Discussions. I had traded the Kevlar for registered investment advisors, which means that any disclosure of performance information, during that time period, is subjected to compliance of SEC Regulations. Also, I would also need to get the permission from the registered investment advisors, who must still operate under the Regulatory compliance of the SEC.
  6. jim

    jim Administrator Staff Member

    More information about the Kevlar can be viewed at:

    Additionally, I presented the Kevlar on the September 21, 2016 Round Table, which can be viewed at:
  7. jim

    jim Administrator Staff Member

    No. I will not provide any previous performance information, nor am I making any claim of that previous performance.

    I was Registered Investment Advisory Representative (registered with the SEC) before Tom and I started Capital Discussions. I had traded the Kevlar for registered investment advisors, which means that any disclosure of performance information, during that time period, is subjected to compliance of SEC Regulations. Also, I would also need to get the permission from the registered investment advisors, who must still operate under the Regulatory compliance of the SEC.

    However, since I am currently not Registered Investment Advisory Representative, I can share that approximately 40 to 45% on my investment account is in Kevlar trades. The rest of the investment is in strong dividend stocks (notice I said "strong dividend" and not "high dividend")... with an occasional "very small" trade, like the short delta trade that I currently have on AAPL.
  8. Trader G

    Trader G Well-Known Member

    I will tell you that I have followed a version of Jim's trade since he posted in a trading group at another site years ago. The returns he is demonstrating now are pretty much in line with what the trade returns were over that period of time. I ran a backtest from 2008 forward (this was a couple of years ago) when I first started trading it and used multiple dte entries on months (ex. 56dte, 40dte, 60dte same month) and the returns are pretty consistent. I am not trying to sell you on anything, I am not a member of the Kevlar service but I will tell you Jim has been very consistent for years with this trade. I even named it the "Riggifly" in my backtesting before it was called "kevlar".
  9. Rtb

    Rtb Well-Known Member

    I have just started following the Kevlar Trade through the Alert Service and to trade through Brexit with out taking a loss was very impressive.
  10. jim

    jim Administrator Staff Member

    To All: I am not claiming anything.

    To Trader G and Rtb: I am sending out your checks out today. :);):)

    To the Financial Regulators : This is what some options traders call "humor." This may be a new word for you, so I have included a link: http://www.dictionary.com/browse/humor?s=t
    Rtb and skimoviestar like this.
  11. JoeLeTrader

    JoeLeTrader Member

    Hi Jim,
    I have a question which is very important for me and that has been asked before by the first questioner but I am not sure whether has been answered. My question is about the proprietary elements in the strategy and if after some time with the service it is possible to dublicate the strategy on my own whith comparable results or is this never possible because all decisions are based on proprietary analysis. So basically my questioin is whether this is a service to learn the concept or just a service to replicate the trades because there are parts that never are revealed.
  12. jim

    jim Administrator Staff Member

    The short is definitely yes, but it takes some work.

    The long answer is much longer...

    Anyone who learns sound options trading skills and masters risk management methodology should be able to become a profitable options trader. It is all about understanding the "trade-offs" when you are making decisions. I could put together a very, very long list of rules... for all the market conditions that I can think of, such as... price, price trend, speed of price move, Greeks (today), Greeks (in one week from now), strikes, expiration cycle, DTE, IV, Skew, term structure, kurtosis, trade configurations, "tape reading", "knowing when you should be scared", etc... These factors would all vary for every option structure, for example, if we had an existing broken wing butterfly with 100 points left wing vs. 75 right wing... and when to adjust with a symmetrical 25 wide wing PUT Condor vs an asymmetrical 25 /40 point asymmetrical condor... and this would be different if the center was 25 vs 50 points below the current SPX point... and this would be different if the Brexit vote was tomorrow... and this would be different... Do you get my point? There are just too many potential "if's."

    I could write 100,000 rules, and next day, something will happen in the market that I will need to write another 20 rules... and following next another 30 rules... and the week after that... Well, you get the picture.

    I think that is much more practical and productive to teach options knowledge and good judgment. If you understand how different options structures (e.g. tow broken wing PUT condors with different length wings) could react in different market environments and how you can properly manage risk in different markets conditions... then you have succeeded. Please notice that I said "could"... and not the same exact single unique path that you happen to have back tested. You have to realize that back-testing only shows you one possible scenario or path. There are thousands of possibilities. You back-test one or five or.... That does help to prepare you, but that doesn't make you an expert. You have to trade and learn to evaluate the trade-offs of the possible decisions that will face you. It is like Dan Harvey and I said in another Forum post... you can back test 2008 all you want, but until you actually trade, live, through a period like the fourth quarter of 2008, you have no clue about what it is like sitting in that pilot seat with your financial life on the line. It is beyond naive to think that if you can get the perfect set of rules, you will conquer the options game. While theoretical rules and trading guidelines are very important, learning how to put them into practice and use them efficiently and effectively, in different markets environments, is what is critical to your success. Do I need to quote Yogi Berra again?

    Why do you think that I am always (well 99.9% of time) negative Delta? Why do you think that Dan Harvey always has a conditional order in the queue? These are no random accidents. It is the way we managed risk. I won't speak for Dan, but in almost ever butt-kicking the market has ever giving me, the two thugs that kick my butt were name Gamma and Vega. Learn to respect, fear and manage them, and you will make money. Don't, and prepare to get your butt kicked.

    I told you that this would be the long answer.
    Luke, Carsten5000, Shin and 9 others like this.
  13. Boomer34

    Boomer34 Well-Known Member

    Great insight Jim! Thanks
  14. DavidF

    DavidF Well-Known Member

    I´ve followed the alert service from the start and even though I knew the principles of these types of trades (typical progression of iron condors to M3 and this over 3-4 years) I´ve improved my trading immeasurably over the past year wathcing and listening to Jim.

    I think I could continue alone (even though I´m not naive enough to believe I can get in 12 months what a pro has got in 20 yrs) but will extend my subscription for another year without any qualms for a number of reasons. Even if I know the fundamentals, left to my own devices I over-trade and am far too trigger happy, too aggressive, sit too much ´on top´ of the market, not enough patience etc etc. In addition to always learning the social aspect of being in the group is also great, otherwise a solitary existence. Sure I´ll get better $$ returns too so no-brainer.
    Last edited: Oct 5, 2016
  15. status1

    status1 Well-Known Member

    I watched the Sep 21 webinar and I have a few questions
    Now that the market is 100 points higher than in Dec last year when the Feb trade was placed I tried a simulation in my TOS account to approximate the trade shown so I used the Dec expiration so that is 67 DTE and I used the same strikes but moved all of them up 100 points
    Was that margin in a pm account ? Because the Margin in my TOS Reg t account shows$110k vs the $44580 shown
    I guess that leaves most smaller accounts out of this trade

    I understand the concern with the small grind up and the hedge with the call but I was just wondering if a similar trade can be put on without the call and use a different hedge adjustment if the market moves up
    Hindsight being 20/20 of course it seems to me that having the call was hurting the most on the downside and if the call was not added than you could have taken profits sooner as the market went down and have protection at the beginning of the trade down to about 1928
    Also instead of closing the trade and opening it lower I was wondering if just rolling the shorts about 10 points lower would have kept the trade profitable longer as the market bounced from the bottom
  16. jim

    jim Administrator Staff Member

    Trying to use a specific trade that I used in one month and applying that exact same trade and adjustments into another month, sounds good in theory, but will NOT work in practice. Should I quote Yogi Berra again on the difference between theory and practice? :)

    For my FEB Kevlar, the maximum margin that I used was $55,340. While this was over the $50,000 account value that I had started with, the Kevlar had made over $8,300 in the previous two months, the DEC and JAN Kevlar Trades (Note that DEC 2015 was the first Kevlar trade in this trade alert service)... Yes, I did take the liberty to use some of the $8,300+ that I had made. The date and timestamped trade messages are all listed out in "Messages" for all Kevlar Subscribers to see.

    As for needing a large account to learn or trade the Kevlar, that is NOT true. In my opinion, a new student should NEVER be risking any money that they can NOT afford to lose. Instead of using $50,000, the SPY can be substituted for the SPX. This will reduce the required capital from $50,000 to $5,000 since SPY is 1/10 the size of the SPX.

  17. status1

    status1 Well-Known Member

    Thank you for the response
    I was not trying to literally apply that strategy myself I was just looking at it in general to find out what it would be like to trade that strategy as it was presented in the video only because it was a relatively easy comparison being almost exactly 100 points difference

    You said the maximum margin used was $55340 but the TOS platform says the margin would be $110000
    Is that because you are using a PM account or maybe I am missing something ?

    As far as the SPY yes I am getting 1/10 less but it is $11000 not $5000 so it's the same difference only proportionately less
    If I was going to try it I would rather use less contracts or do it as a butterfly in puts or calls to make it more affordable rather than use the SPY and use something other than DITM calls to hedge the upside I know that at that point it's no longer a Kevlar but that's the only way I see myself trading this
    At this point I only want to find out about the margin to make sure I am not missing anything
  18. Ryan Simmen

    Ryan Simmen Well-Known Member

    I think there is a bug in the TOS paper money account whereupon the margin requirement is doubled. Try right clicking on the account and adding more money to avoid the margin limitation. In a real money account the margin requirement will be equal to your max loss at expiration.
  19. jim

    jim Administrator Staff Member

    Ryan, thank you. I did not know that about the TOS paper money account margin calculator... probably because I've never used the paper money account. I believe that using a paper money account will not give a true feel for the way real trading actually works.

    For covered positions, like the Kevlar, (i.e., no naked shorts) a simple way to see if TOS (other brokers may vary) margin calculator is correct, is to look at the maximum possible loss at any point in trade. In the Kevlar trade, this is always at expiration. Using a specific trades and adjustments that I used for the February expiration, $55,340 was the maximum margin used. Any theoretical trade done differently than the specific trade that I didi, will have a different margin requirement.

    Sent from my iPad using Tapatalk
  20. Boomer34

    Boomer34 Well-Known Member

    Quick question about the Kevlar service:

    If you subscribe (not trial, full subscription), do you get access to all past videos/webex/etc to go back and learn/listen to past insights?

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