Hi, I have been reading this forum for a while now, and I find everyone very helpful and very knowledgeable about trading options. I have watched many of the youtube videos by capitaldiscussions, I especially liked the RTT videos by Dan and Tom. I am intrigued by M3 but I have a small account (< $10,000) and I see there might be issues with that. Anyway, I finally was going to at least try and enter a RTT trade and see how this trade works using real money, not expecting to make a profit since I'm just starting out. From the videos I have watched about RTT, it says to risk no more then 5% of max margin on the debit for this trade. With the IV so low currently, the SPX 75 dte BWB is over 20% max margin (debit).
Max Margin was $1280
Debit was $280
Is this strategy just not tradeable at these prices? I looked at using SPY and even XSP (which was really expensive) but the ratio was the same or worse.
If I pay that debit listed above, is there still room to profit, or at least still learn from this trade. Is this large debit too much to overcome (especially for a new trader to RTT). By the way, I'm not a novice trader, I have been trading futures for a couple of years slowly adding to my account, and have dabbled with options before but nothing too serious.
Sorry for the long post
Hi mje. We are trading the RTT strategy very successfully. I have not had a losing trade since last July ($40 loss). The equity curve continues to head up at a 45 degree angle. While it is true that the returns are somewhat smaller (3% to 5%) during periods of low volatility as opposed to 7% to 10% or more during periods of higher volatility (better premiums), the appeal of the RTT is its performance metrics which are accessible on the History tab of the Class page. If you are not currently a subscriber you can join as a trial member for very low cost. As far as the margin and risk you describe, all my trades comply with the 5% rule (or I don't take that setup) since that rule is an integral requirement and is part of our Trade Entry Tool, also accessible to subscribers. The reason that we incorporate the rigid 5% requirement is that, in up-trending markets), we use the Reverse Harvey procedure to lift the right side of the expiration curve above zero. Also, we add selected layered trades such as Baby Butters to increase profit potential in this setting. In more "normal" two-way markets, the butterfly makes a very nice profit with a 90% or greater win rate.