Wednesday, January 30, 2008

Agora Outlook option selling strategy

Agora Outlook is a company started by Ken Davidson. They feature a strategy of option selling, using outright selling and credit spreads on the cash indices. It is subscription-based.

The returns shown on their website are market crushing. Since 1990, the lowest return has been 48% in the 'regular trades' system, which occurred in 1998. Every other year has been higher than that, with several years returning over 100%, and the average return is 134%!!! The best part is that the system has been working since 1990. These are not hypothetical backtested returns!

Unfortunately, the site does not give details on drawdowns or the leverage used. Usually, option selling strategies have a high win % and high leverage, which means that every once in a while they get whacked pretty good.

Agora probably uses a sophisticated timing model to enter into trades. The cost is not too bad, $100 per month or $1000 per year (for retail investors). They donate most of the subscription proceeds to charity, which means that Agora probably makes more money trading than they do selling the subscription.

This strategy would not be for risk-averse or inexperienced traders, due to the leverage involved.

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