ITM Strategy - Does it work?
After my foreshadowing last week that I was thinking of giving up the books and the blog I have had some lovely emails – thank you to everyone who has taken the time. It is truly appreciated.
But of course, there have been a few crowing that I am finally admitting that it has all been a fraud and that ITM doesn’t work. That if my results are better than Buffett’s they can’t be believed. Etc. What to respond?
Are you admitting ITM doesn’t work?
Not for a minute. ITM works. It has been backtested for more than 100 years, right up to 31st March 2024, and the figures are all in the updated books. Since then, it has gone up another 12% – 15%, depending on your leverage. The figures are all there, easy to check them.
If the backtesting results don’t convince you, here are some account snapshots from a few accounts that I check every day. Naturally, as I never talk dollar amounts, the balances have been smudged out.
The one above is the 1-year results, mainly ITM on SPY and QQQ, but with around half (at the start) in straight SPY & QQQ shares. I have withdrawn around 10% of the capital over the year to fund living and travel expenses, so that actual result would be higher.
Another is this one: it uses more aggressive ITM and does not hold any shares. I withdrew 38% of its value last November, again to fund my extravagant lifestyle (!), so clearly the results are actually a LOT better.
And another little account, very aggressive ITM, not holding anything for more than 3 months, so it turns over 4-6 times a year. This is the result for the current batch of options:
There are other accounts I could show, but that’s a bit boring. You get the general idea.
Can we believe it?
Of course, I could have photoshopped them. But I haven’t (other than the blurring). You can believe me or not. Completely up to you.
Rich Daddy?
No. That would have been nice, but no. I started trading 25 years ago with an account of $200. I have not put any significant money into it, relying on trading it up. It has totally funded my lifestyle since 2018 when I closed my business. I have no other income.
So Why Unpublish?
Vanity. I hate not being in the top 10 list for the categories I am in. I find it humiliating to be way down the list. Yes, I am selling more books than ever, but barely breaking even.
Let me explain.
I don’t expect to make any money from the books – the costs are too high. Amazon takes the lion’s share of every book that is sold, and the main cost is ‘Amazon Advertising’. If you don’t use Amazon Ads your books disappear without trace – I know, I have experimented with various levels of Ad payments over the years. Basically, if I don’t pay them over $1,000 per month my books go way down the list of best sellers, and it takes months of paying them $1k per month before they deign to let them get back into the rankings.
I could go on (and on and on) but I will stop there.
I’m just fed up with all the work that books involve and all it does is fill Amazon’s coffers.
Grump. Grump. Grump.
Paying for the blog
It has been suggested that I charge a fee for access to the blog. I do not want to do this because (a) I make my money from trading not writing books and (b) I want to have complete freedom of choice about what I do, which I wouldn’t have with paid access.
So, no. But it was a nice thought – thank you!
To the markets . .
Last week was a good solid week, although a shortened one. The market is showing surprising stability in the midst of the political turmoil. To the charts:
SPY Charts
After a couple of weeks consolidation, SPY broke through what I thought may have been resistance at $550 and is trading over it. I expect it will get tested as a support level this week – watch to see whether it holds or gives way. Holding will be a bullish sign.
The weekly chart shows the uptrend continuing, now well over resistance at $480.
SPYG Charts
SPYG is showing a similar patter to SPY. After consolidation from early June it has now got over possible resistance at $81 and is continuing up.
The weekly chart shows the uptrend continuing, now well over resistance at $82.
QQQ Charts
QQQ has been in consolidation since 10th June, with a ceiling of $487 but now seems to have broken to the upside. It is approaching 500 – a momentus figure, so I expect it to bounce off it before finally making through. Why? Because humans are risk-averse and traders will be wanting to ‘lock in their profits’. Just a guess.
The strong uptrend is continuing.
VIX Chart
The VIX continues to be at very low levels, signaling that volatility is currently low.
ITMeter
The week ahead
Powel is talking again (doesn’t that guy ever shut up?) and is testifying to the Senate on Tuesday and Wednesday. Earnings season is upon us again – on Friday it is the big banks: JPMorgan Chase & Co (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), and Citigroup Inc (NYSE:C).
What does tis mean? We are probably in for a bumpy ride this week.
Musings from Italy
Yesterday I came down the Amalfi coast. Yes, the coastline is absolutely beautiful. Stunning. As gorgeous as I remembered it.
BUT . . . why does anyone go there?? Yecchhhh!!!
OK, I was spoiled the first time I went there 35 years ago (good heavens – 35years?? I am ancient!). There was nothing like the crowds and the traffic there is now. I am still reeling from the sheer numbers of people, scooters, cars, buses – it was quite horrible. The only way I am ever going back is in a large yacht where I can watch it from afar.
Beach, anyone? Some relaxing driving perhaps?
Why am I pontificating? Because travelling is where you (well, I) reflect on life and the human condition. Why does everyone come here? Because everyone else does! Why do people listen to financial advisers? Because everyone else does. Why do people read financial journalists? Because everyone else does.
If you want to get what everyone else gets, then do what everyone else does.
Using commonsense
I moved down the coast a bit to Maratea, staying at a hotel with ‘a sea view from my private terrace’ (sure, if you stand on tip toe, and squint!) and a nice pool. And I was swimming this morning, the only person in the pool (after it opened at 10AM – mustn’t rush these things.), floating around admiring the view of the mountains when an official-looking guy in a uniform started yelling at me. Then a couple of other people joined in, so I swam to the side to see what the problem was.
It was major: I wasn’t wearing a bathing cap! You know, those rubber skullcap things that your grandmother used to wear? That you haven’t seen for decades? That was it. Of course, no-one had one, and no-one, male or female, was allowed in the pool without one. Evidently it was for our ‘safety’.
The result?
Yep, that’s the pool nazi sitting under the umbrella, under the tree waiting to tell people to get out of the pool if they didn’t have a hat. In the 2 hours I watched no-one got in the pool. Completely empty. What a waste. The musing?
Some rules are stupid.
Especially investment rules: Diversify. Buy quality stocks. Hold on to them. Don’t sell in downturns. Don’t try to time the market. Dollar cost average. Listen to the experts. Unfortunately, the fallout from those rules is that you are destined to stay poor!
The futures
The futures are down slightly, but up from when I last checked a couple of hours ago. It is still 5 hours to market open.
Well, a bit more disclosure this week than I am comfortable with, but thought that it might put a few minds at rest. I’m not a scam!
Fingers crossed for a good week!
Heather
Questions & Answers
44 Responses
Heather, one comment and one question…
Comment — YOU ROCK! Please know how much you are a “candle in the darkness” — the darkness which results from “sage wisdom” such as buy-and-hold, fund managers can outperform indexes, you-cannot-time-the-markets, etc. Your voice (and your numbers) ring true. For me, for all of us, it would be a major disappointment, dare a danger, if your voice went silent. As some proverb says, if you save someone’s life, you are responsible for them going forward… (No pressure, though! :))
Question — What is “Aggressive ITM”? Are you cycling option holdings sooner? Taking more delta risk? What are you doing which doubles rate of return?
Thanks,
-doug
Hi Doug – thank you. Appreciated!
Re the ‘aggressive ITM’ I should probably have said more active ITM – higher strikes, shorter expiry so quicker turnover. Also up to 5% OTM trades. Still everything on SPY and QQQ.
Actually, I don’t know how much I will rock after today! SPY down 1%, QQQ down 2% – I hate days like these!
x
h
Hi Heather,
I love your content on your blog and have bought all of your books. I just bought the PHYSICAL copy of ITM and need to leave a review. You are such an asset to this arena and thank you for sharing all of your hard work and research. I hope you decide to continue you doing it! I have quit reading everyone else, and just follow your blog now. I wondered if you could help me with a hypothetical buy since the market is at an all time high today, I thought it might be wise to wait a few days or longer. But I want to understand what I am looking at. When I pull up the Jan 17 calls on Schwab, I am seeing that there are strike prices at 50%, but at 280, is the current intrinsic value fit the parameters? I am not sure I am running the math correctly.
Thank you,
Amy
I am in process of rolling over 401K to IRA. In a Rollover IRA can you use options and stop loss. If so, which brokers allow both. I have searched internet and can not find answer.
Russ
Hi Russ – I am afraid I cant help you. I don’t know anything about this, and I am not qualified.
I only know how to make money trding, not about atx implications.
Sp sorry!
h
sandyprice@gmail.com
Russ, I am doing exactly what you say in my Fidelity Roth Account. I also know that Tastytrade allows these trades. I suspent that almost any major broker will allow that also.
sandyprice@gmail.com
Hi Heather,
Just wanted to echo my support for you and what you do for all of us. ITM is without a doubt the BEST strategy I have ever used. Like some of your other readers, I’m not a social media guy, don’t read blogs in general. However, yours I read and look forward to every Monday.
It’s refreshing to hear someone talk about how they got started … all the courses reading the latest books, listening to CNBC – only to realize much of it is noise and the system being push does not work.
It is motivating to read about your previous job in IT and your desire to make enough money in stocks where you could exit that strategy. Not easy to do with a family in tow.
I find it appalling that Amazon treats author’s the way they do. They need to flip the script and give authors an incentive to publish new books e.g. author gets 80% of proceeds. In a show of support, I have purchased all of your books including the 2024 ITM even though I have the original.
Keep up the great work!
P.S. Tell the pool bathing cap nazi that he needs to get a real job! Seriously, I didn’t know they still sold bathing caps.
Thank you, Jeff – really appreciated. I hesitate about doing to many stories of my earlier years in trading as one reviewer called them ‘lame anecdotes’ – and that stung! But I always want to know how other people got started – in business, trading, anything.
And thank you for buying the books – what a great vote of confidence!
And the bathing caps – I haven’t seen any for many years – and obviously no-one else had either!
Cheers – great to be reading you. Never underestimate the longterm of putting stuff out there constitutes.
OJ
Hi OJ, nice to hear from you!
h
Heather,
At my age I am not involved or interested in blogs, podcasts or any type of social media communication however I have read your books and I consistently read your blog. I just read the positive comments for today and I agree with all of them. You are an inspiration to us, the lonely individual retail investor, You have obviously walked the walk so your knowledge and experience has great value to anyone with an open mind and desire to improve their life through investing. You have a gift of putting how to invest in understandable terms so all can understand.
The naysayers are either jealous, ignorant, lazy or a combination and only constructive criticism has any benefit. Keep doing what you do best and continue enjoying life!
Joe
Hi Joe, really appreciate your kind comments!
Thank you!
h
I have been studying the markets for decades reading financial books, buying software and newsletters but I find your sharing of your experience to be the most authentic rendering I have seen for years. You have demonstrated that a person can earn a living off of the markets by study and making smart decisions. Please do not allow the Naysayers to sway your course. Thank you for setting such a great example for others.
Hi Ronaldo – yes, it is possible but it took me quite a few years. I just wish that I had known what I know now 20 years ago! Could have saved myself a LOT of pain and angst.
But I have to say I absolutely love trading and not having to answer to anyone about anything – and being able to travel for months and stay in beautiful places.
Thank you for your lovely comments.
h
Dear Heather,
Once again, thank you so much for your honesty and the details of ITM method. Is it possible for you to set up a Discord Channel for the ITM method so you can keep us updated. I wouldn’t mind joining your ITM method Discord with a small monthly fee. Once again thank you so much for your weekly blogs and please do not pay attention to the toxic people who like to create dramas. Even the great Warren Buffett and Charles Munger of the Berkshire Hathaway still have toxic people distracting them. One person that I can think of is Bill Gates.
Sincerely,
George Edward Halongton
Hi George – I hadn’t heard of Discord so I did a little research – it seems it is mainly for gamers? I also researched how I could replicate it in WordPress/Elementor (thats what the website uses) and there seem to be a couple of plug ins that would work. I will investigate it further when I get back to my office with my desk and big screens – I hate working on a laptop.
And thank you for your very kind comments!
h
Dear Heather,
Thank you for your reply and I appreciate it very much.
Sincerely,
George Halongton
Hi Heather, I’m curious about your intent for having multiple accounts. From the outside looking in, it looks like you have your main account for 1x – 3x leverage with 50% of your account with 1x leverage (SPY & QQQ shares). Is that for risk management purposes and/or to easily sell shares as needed? I assume your other/smaller accounts are for 4+ leverage. I have QQQ, SPY, and SPYG options in one account. As my account grows, I’m wondering at some point does it make sense to not to leverage 100% of my account? For example, with a $1M account balance, up to 5% can be in a separate brokerage account for aggressive ITM while the rest is split 50/50 or 60/40 with 60% in ITM and 40% shares based each person’s risk tolerance. I’m not looking for a recommendation. Just curious how you approach risk management since you’ve been investing for the past 25 years. I know eventually I want this to be my primary income.
Hi Jason – multiple accounts? yes, I have WAY too many. I am always trying new brokers and then can never close an account (as it is such a hassle to open them) so I have ended up with them all over the place. Probably 25+, which is ridiculous, I should amalgamate.
But how I use the multiple accounts is for different strategies. I have big accounts where I trade safely (ITM (SPY / QQQ) stocks (50%), options (DITM 45% / ATM 3% / OTM 2%) – but of course the percentages always change, so in a bull market the 50% stocks becomes a lot less. I have littler accounts where I try various strategies (day trading / condors / currency / anything I have read recently that I want to check out) and it doesn’t matter too much if I blow up the account (although I prefer not to!)
Specifically you ask ‘at what point does it make sense not to leverage 100% of your account’. Great question, and one that really depends on you tolerance for risk. For me it is over a million dollars in the account – then I have 50% unleveraged – but, of course , that percentage changes as the market goes up and the options increase at a faster rate than the ETF stocks.
I feel this answer is rambling a bit. please get back to me if I haven’t answered your question.
h
In your post, you referred to updates to your books.
I have your bull and bear strategy books.
How do get updates?
Best Regards,
Steve
Hi Steve, I understand that if you have the kindle version you can contact Amazon customer service and request the most recent update. I have made the updates as updates not new editions for this reason.
Some people have had no trouble with Amazon CS providing updates, others have had a hassle. I am afraid I can’t help in any way, I have to go through the same channels as you.
If you have a paperback or hardback then the only optionn is to get a new one. When I brought out the latest version I dropped the price as far as possibe and told everyone in the blog, but I had to put it up again to cover costs.
Hope this helps, and good luck!
h
Heather,
Thank you so much for all the dedication and hard work that you have put into your books, and this blog. I will truly miss your blog updates. Reading your site has become a Monday morning ritual. The ITM strategy has changed my approach to investing/trading. Like so many others and yourself, I have read books and purchased services that just never panned out over the long run. I am so thankful that one of the first books I read on trading was Trading for a Living, and it instilled money management, otherwise I wouldn’t have had any money left to use for ITM. Now I have about 90% of my portfolio in ITM calls for QQQ and SPY, and it has been a proven winner. Hopefully it will be a long time before we need to use the ITMB strategy. Either way, I am confident that my portfolio will continue to grow and out pace the market year over year for the rest of my trading days. Hopefully I can pass this strategy on to my kids as well, to save them from years of trial and error.
It will be a sad day when I no longer have your blog to read.
Thank you David – I have had so many lovely emails that I am seriously reconsidering giving it all up!
I really appreciate your kind comments.
h
I very much appreciate your teachings on your methodology – thank you. Given that, you have made that methodology very clear and thorough for both up and down markets. Unless you conclude one day that the world has changed and you must significantly modify your system I see no reason a diligent student should have any problem following your system even if you never published another word. Thanks again and I hope you enjoy every minute of doing what you want to do whenever you want to do it!
Jay
Hi Jay, I am pretty sure that people don’t change, and the stock market is just millions and millions of people!
Thank you for your very kind words!
h
Hello Heather, I would hate to see you give up the Books and Blogs… I have been investing for well over 40 years and have read every book you could think of, and for my money, You are right up there with the Best of them! The ones I thought were worth the time to read were Ben Graham, Jessie Livermore, Peter Lynch and You… Most of the others were just trying to “sell” a system or an out and out money grab. DITM works so please think about continuing to provide guidance and mentoring to your “flock”…
David
Hi David – thank you for your beautiful comment – I feel very humbled.
And I have had so many lovely comments and emails that I am seriously reconsidering!
Thank you.
h
I read Heather’s books in 2022 but I didn’t start the DITM strategy until June 2023. I can say it is working well for me with less anxiety and time management compared to other strategies I’ve tried. I’m thankful I stumbled across her books on Kindle Unlimited. It’s been a game changer for me.
Hi Jason – glad you found it and it is working for you. Just watching the market now, and all is good, up again, so hopefully you have a nice surprize when you check your balance!
h
I have had more success using Delta 85-88 Calls with quarterly monthlies. For example I have QQQ Sept 420 Call now a delta 92 but originally purchased with delta 88. My ITM Dec Calls have not appreciated as fast as the Sep Calls. I have also observed that open interest is higher in the quarterly months Mar, Jun, Sep, Dec which would indicate that liquidity will be higher and easier to trade in/out/roll in these months as compared to say Oct or Nov. So I’m sticking with the near quarterly Sep until 9/1 and then I will roll to Dec 85-88 delta each quarter. I’m also allocating 50% more capital to QQQ vs SPY as it appears to be the alpha leader in 2024. Overall I happy with the results YTD my account is up 55%.
Hi Baja? Pete? Nice work! Should be up a little more after the last couple of days.
Re ITM on QQQ / SPY – I allocate them 50 / 50, and I accept that QQQ has done better than SPY – so well done!
h
Your remarks about locations crowded with tourists reminds me of what is referred to as a Yogiism (Yogi Berra) who when referring to a popular restaurant once said, “No one goes there any more. It’s always too crowded.”
Many thanks for the publication of your books; I’ve no doubt about ITM having been a very successful strategy. It has the advantage of being simple as well as effective.
Like many, I shall miss your weekly blog, but the approach to markets which you have shared will continue to benefit many of your readers.
Best wishes,
Al Vollmers
Hi Al, thank you for your kind words!
h
I’m loving your system, your updates and your attitude!!! Thank you My very small account ($2200 to start) is up to $4300 using SPYG – and I appreciate your willingness to provide info for us ‘small’ guys. Birthday 88 coming soon and I’m still dreaming of all that can be possible. Keep up the good work and be Blessed.
Sheryl
Sheryl – what an inspirational comment! I think I have heard from you before?
I am so glad your account is going well – and hope that it is looking even better today. Re ‘small guys’ – I was a ‘small guy’ too, for years, and I sometimes have to pinch myself when I look at my accounts now – so keep dreaming! It is possible!
Lovely to hear from you.
h
Hi Heather, I really really hope you don’t stop doing the blog. I trust everything you say with the DITM strategy. My question is, if I wanted to trade more frequently, do I use the same DITM strategies as the yearly strategy? Thank you, love your weekly blog.
Rich
Hi Rich – I remember your name – great one for a trader!
Yes, I use the ITM strategy on monthly options all the time. For both SPY and QQQ I now try to go 6-9 months to expiry, and have lots of different positions bought at different times and at different levels so there is always something going on.
I think that is what you mean? If not, please get back to me.
h
Heather,
Tune out the naysayers!
Those of us that have read hundreds of books on investing, participated in the stock market for decades and have tried various strategies, know the veracity of your statements and how effective your approach to investing is.
Enjoy Italy.
Thank you Steve! I do need to try to ignore the bad comments – and that is easier now with all these lovely comments.
Thank you!
h
P.S. at Tropea, decied to stay here a bit longer, then off to Sicily.
Hi, really appreciate all that you do. Pay no attention to the haters.
Thank you Joseph – realyy appreciate your taking the time to make that nice comment.
h
Those of us that have done the backtesting ourselves know that you are not a scam. Before I invest in something new to me, I go through the charts using Tradingview where backtesting is quite easy, but just takes time. I went through all the years first, then individual years and I came to great results, so then started trading ITM. I would recommend anyone who doubts the results, go on TradingView, do replay back to any date, and follow the ITM rules and you will see the results. My guess is that people who have a problem with it get nervous when they see the market start declining, they jump out, just before the market goes to new highs again. I also guess that many get in when they should stay out.
I will forever be indebted to Heather for her books and blog. I only wish I had jumped in quicker, but I have followed many so-called experts over the years where I jump in and suffer large losses. I may have been over cautious with ITM, but it seemed to simple. I am the type to sit there for hours, study the market, and trade. It is hard to believe that something so simple actually works, but it does.
Hi Jeff – thank you for your lovely comment. And I agree that it is hard to believe something so simple actually works, and it is also hard to believe that 2 such round numbers as 10 and 200 has the best results. It sounds like 2 numbers I just plucked out of the air – why not 13 and 191? But I have checked and checked and they work best.
Thank you again!
h