CIB Trading Course – A Review

thetatrendAs an active trader, I am always interested in learning about different trading strategies. I have two or three strategies that I have been able to learn and trade with consistent results, but not all strategies will work in all market environments. Additionally, not all trading strategies are compatible with the trader, whether it be their risk tolerance or perhaps their account size. Regular readers of this blog know that I have been experimenting with a weekly straddle strategy using S&P 500 futures options. The strategy is a proven strategy, but it is not working for me simply because the positions are too large for my account. When this happens, it puts a psychological strain on the trader which makes it nearly impossible to make rational trading decisions. In my own personal situation, I have decided to just look for a graceful way to exit the trades even if I don’t make a profit. It has been a learning experience, but at this point, it is not an appropriate strategy for me. But this article is not about me or my trading. It is about a new options trading course that was just introduced this week – the CIB Trading Course from Theta Trend.

I first became acquainted with the Theta Trend and Dan Neagoy several months ago through this blog. In fact, Dan made some comments regarding the straddle strategy and suggested that I might consider looking at another strategy that had similar rewards with less risk and the ability to easily adjust the position should the market move against your position. This was my first introduction to the Core Income Butterfly strategy. I began following Dan’s blog at www.thetatrend.com but was unable to easily grasp the mechanics of the trade. As I began corresponding with Dan about the strategy, he indicated that he was working on a trading course and offered to allow me to preview the course. Over the past two days I have spent considerable time digesting all of the materials.

The course includes a comprehensive 40-page handbook that details the strategy. In addition to the handbook are over four hours of videos that clearly explain the strategy with actual current and historical trade examples. Dan has also created several technical indicators for the ThinkOrSwim platform using Thinkscript that are included in the course. Most importantly, the trading rules are clearly presented for entry, exit and adjustments. Also, Dan has recommended exit points for trades that are unprofitable which has the added benefit of removing emotions from the trade and limiting losses to manageable amounts. The strategy can be traded with as little as $5,000 of capital, although Dan recommends $10,000 as the optimal starting point which keeps risk at a very small percentage of available capital.

The strategy is based on the butterfly spread (hence the name, Core Income Butterfly). However, it has an interesting twist by adding a long call to the position in a 10-to-1 ratio which creates a very delta neutral trade that is forgiving even if the underlying moves close to or outside of the wings. The image below shows a sample of what the risk profile looks like on a typical trade.

thetatrendanalyze

One of the cornerstones of this strategy is that it most definitely will require adjustments during the life of the trade. Trade adjustments are often shunned by traders because they are a way of putting off what is very likely going to be a loss. However, with the CIB strategy, as each adjustment is made, the probability of success actually increases as does the potential profit. Dan provides a very concise and mechanical way to adjust the trade to insure the greatest possibility of success. There is considerable time spent in both the handbook and videos on this subject which I found to be quite intriguing.

I have not yet personally traded the strategy, however I definitely plan to give it a try. I have done some backtesting and my initial research confirms that it is a solid strategy which is very forgiving and easily managed in the event of larger-than-expected market moves. There are many traders who trade the butterfly strategy with different rules, guidelines, and goals.  The real difference is in how the trades are managed and the objectives of the trade.  Dan has done a nice job of packaging the strategy with materials that are very easy to understand and logically presented. The course is a good value and will likely pay for itself within the first trade or two.

  • I am also going to give this strategy a serious try in 2016. I have been studying the course and think it is well done. The CIB looks very promising. I need another strategy that I can use to diversify from my normal credit spread strategy.

    • That’s awesome Jonathan! You’re always welcome to reach out with questions. I enjoy following your trades and I’m happy to help.

  • Aram, thanks so much for the awesome review! I really like your discussion of how the trades we put on need to both fit with our psychology and risk parameters. You’re absolutely correct. Trading is largely psychological and it’s entirely possible for one trader to lose with a system while another one wins. I’m looking forward to watching how you trade Butterflies going forward.

    I do want to make one distinction and clarification. There are many traders who trade the Butterfly with different rules, guidelines, and goals. The real difference is in how the trades are managed and the objectives of the trade.

    Thanks again!

  • drmark27

    How is the weekly straddle strategy “proven?”

    • Aram Basmadjian

      There is plenty of research available that shows it is a viable strategy, assuming you have the ability to weather drawdowns that can be substantial at times. The best public research on this is available at http://dtr-trading.blogspot.com/p/spx-straddle-articles.html

      • drmark27

        I don’t see anything on weekly strangles at that website. Aside from that though, you make an important point right here. If you can’t weather the DDs then it’s not going to work for you and it’s therefore an ineffective strategy. It might look plausible on paper but that’s Fantasyland. We can make _all_ kinds of strategies look good on paper but when it comes to the hard work of making a trading strategy into a system, lots of good ideas go up in smoke. I would never say any strategy is “proven.” In my opinion, risk tolerance is way too subjective to make any sort of definitive claim like that.

        • Aram Basmadjian

          I know of two fellow traders that have implemented the straddle strategy weekly and have been doing so for several years with great success (greater than 40% annual returns). That is what I mean by proven – in other words, it is being implemented and working and has worked over the course of many trades. Please do not construe my use of the word “proven” to mean “guaranteed.”