Best Stock Strategy with David Jaffee
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David Jaffee of Best Stock Strategy is a very successful stock options trader. TradingSchools.Org authenticated superb results spanning multiple years with actual brokerage statements.
He is also offering an options trading signal service, and an educational product. The pricing is expensive. But the product and accompanying interaction with Mr. Jaffee is priceless. He goes the extra mile to help newbies understand his method, and works extraordinarily hard at providing a top tier advisory.
TradingSchools.Org put Mr. Jaffee through a very difficult, one-year performance test, and Mr. Jaffee performed beyond our expectations.
Additionally, Mr. Jaffee has other intangible qualities, which include prior experience as an investment banker and economist at well known CIBC World Markets.
Yes, we recommend the product and the service. His investment approach is unique, battle-tested, and focuses on highly repeatable processes that most students should be able to synthesize within 6-months.
Patient and kind teacher
Solid approach to investing
Focuses only on high liquidity large-cap stock options
A highly entrepreneurial person with excellent adaptability
Do not expect to learn everything overnight
Significant capital is required
A few personal “dings”
Part I of our review of David Jaffee’s “Best Stock Strategy” Options trading school covered the individual investment performance of David Jaffee over several years.
Additionally, we detailed who is David Jaffee, his relevant life history related to investing, his work experiences, personal successes and failures, and a general overview of “who is this guy.”
I highly recommend that you read Part I of the review, this will provide context.
Part II, we will finish this review by detailing his investment style and all of the “nooks and crannies” of useful information that I observed while watching him trade over the previous year.
In short, Part II is “The secret sauce.”
What I don’t like.
First, let me start off by saying what I clearly do not like about Best Stock Strategy and David Jaffee.
On the Best Stock Strategy website, it states “You’ll learn the absolute best trading strategy; it only takes 2 – 3 weeks to acquire this valuable skill.” This statement is complete and total hogwash.
In fact, it’s just shitty marketing. The truth is that after watching David Jaffee trade over a long period of time, it became readily apparent to me that there is a huge amount of work, nuance, and effort that goes into his investment strategy.
Additionally, Mr. Jaffee is hyper-focused on what is happening with the overall market, as well as the individual companies that he tracks. He calls the individual companies that he tracks as “market leaders.”
Market leaders and their “perfect price”
Most people think of a current market leader as either Facebook, Amazon, Netflix, or Google.
However, David Jaffee takes it to a whole new level and considers a “market leader” as the largest capitalized stocks within each individualized sector.
Remember in Part II of the review, we talked about how David “tears the balance sheets of companies apart” to discover their intrinsic value. He used these models as an investment banker.
Now, you would also naturally assume that David also takes that same approach to analyzing publicly traded companies to make decisions regarding short term speculation. However, I found this not to be true. Which was actually very surprising to me.
According to David, “With large-cap stocks, you don’t have to worry (as much) about little bits of hidden or surprising information. These large-cap stocks are analyzed minute by minute, by the smartest people on the planet.” In short, with a large-cap stock, the current price of the stock reflects all of the available public information, therefore there is no need to read research reports or compete on information.
Think about that a moment. David Jaffee, a guy that spent years as an investment banker tearing apart companies is telling us that there is no need to do deep-dive analysis, or any research at all, on large-cap stocks!
Additionally, as he explained, “to be successful at trading options on large caps, at least on a short term basis, you need to focus on the trading range of the underlying stock, the volatility index and identifying underlyings that are overextended in price on a temporary basis – then by selling premium, you’re able to profit from the time decay and the fact that the actual move is almost less than the expected move.”
What does that even mean? Let me explain.
Options buyers are usually wrong
As David explained, and as his personal trading performance reveals, his core trading philosophy is that “selling premium on liquid market leaders that are overextended in price will yield large profits and a high win rate.”
What David does is he is hyperfocused on ~15 companies and knows their recent trading range, then if one of those underlyings makes a short-term move outside that range, he will sell a call or put option AFTER a stock has experienced a shocking move, expecting the stock to revert back to its recent trading range.
Example: if a large cap stock suddenly bolts higher, then the unsophisticated market participants will naturally attempt to chase the rally. But since David believes that this move is likely caused by a short-term overreaction, then the price will usually pull back and establish a new range.
For example, in June and July of 2020, TSLA increased in price from $950 to ~$1750, David recognized that this move was irrational, and fueled by emotion, so he sold out of the money call options on TSLA and did very well. He as actually WRONG on TSLA, because it continued to increase in price, but because he afforded himself a large safety net, and waited until AFTER the stock’s large move higher, he ended up making a large profit.
David mentioned, “Small investors that buy options are always net losers. They always chase. They always gamble. And they always hope that price continues in one direction. And, perhaps most important, they are fighting time decay. Not only do they have to be right directionally, but the magnitude of the move must exceed the expected move, which rarely happens. Rationally speaking, no one buys car insurance or health insurance to get rich. Yet investors are buying insurance expecting to make money? In reality, the ones making money are the insurance companies, and by selling calls and puts, you’re turning yourself into an insurance company.”
But we all know that the stock market is a “trick factory.”
But what happens if a stock keeps running?
Many readers are probably thinking, “Yeah, but sometimes the market gets crazy and just keeps on moving higher or lower, and options sellers get burned!”
This is true. Sometimes options sellers do get burned. However, I got the full Jaffee option seller experience during the market turmoil of February – March 2020. I got to see how he handled it.
And what did I see? As Put option prices and premiums went through the ceiling — Jaffee was only too willing to sell expensive options.
Additionally, during this period, Jaffee was selling vertical credit spreads, so even if the market continued to crash, his maximum loss was already defined.
As market participants were declaring the end of capitalism, that the stock market would crash to zero, that stocks were worthless. David Jaffee managed his positions, remained patient, and did reasonably well.
Here we are a few months later, and the stock market is once again threatening new highs. A few months from now, we will have an election, and the same crazy behavior may once again resurface. People will be declaring the end of the world, and options prices may spike…but sitting in the quiet corner will be David Jaffee, patiently waiting and selling puts and calls to the uninformed and the blatantly ignorant.
The Jaffee Insurance Company
Before I drafted this review, I asked David a few very pointed questions. My first question was, “how would you describe your trading style?”
David replied, “Look, this is not very difficult. I don’t use any trading indicators and fancy accounting that I used in investment banking. In fact, the best way to describe my trading is that of an insurance company. I basically wait for overextended moves in the largest companies, then sell out of the money strikes. And while I win almost all my trades, I always make sure that if I’m wrong, then I can easily manage the position.” “
We all know that insurance companies make their money by collecting premiums. That’s all David Jaffee is doing — he is collecting premiums. As David explained, “My goal is to collect premiums and make consistent money. Yes, sometimes I get caught and lose, just like every insurance business — but that’s extremely rare. And as long as I’m trading small enough, then the losses are negligible.”
However, as David explained, “The insurance company, in the long run always wins.”
David was also adamant that “nuance” is vital in trading. People can replicate his strategy, but they may not make the same decisions. They may trade too large, not choose the right strikes, manage a position at the wrong time, enter a position too soon, etc.
These types of “nuance” decisions can have massive effects on a portfolio’s performance – and it’s this type of expertise that many of his students pay for.
If you make so much money, then why sell a course?
Isn’t this a relevant question? I mean really, if you were making nice bank selling options, then why be a skanky seller of courses and advisory services?
David replied very candidly, “I do this for three reasons. Number one, the money is good. I am selling a product, which is my unique knowledge and skills, I saw many people selling garbage so I wanted to teach people a valuable skill. My time is valuable and my students make money, so it would be foolish for me to not charge for it. The second reason is that I don’t win all the time. During periods of extremely violent moves, I usually show a temporary loss until prices normalize. By selling a course and trade alerts, that income helps normalize some of the portfolio volatility. Finally, I only make a few trades a week, and prior to starting BestStockStrategy.com, I was very bored. I actually enjoy the student interaction and I enjoy running the business.”
He has valid points.
With the rampant scams in the industry, being a “stock coach” surely smelled like a dog fart. He went on to say, “I really enjoy the kind emails that I receive from my students. I get a lot of hate on YouTube because I criticize fake gurus, but I know for a fact that I have changed the lives of many of the people that learned from me and I genuinely believe that I teach the absolute best trading system available for retail traders.”
OK, its a dog fart answer. But I will go with it.
Wrapping things up
First, I want to say thanks to David Jaffee being so honest and open about everything. He went the extra mile to provide TradingSchools.Org with documents and related materials that prove his investment performance, life story, and underlying theories for successful options trading.
He opened up his entire life to my wicked pen. And let’s be honest, my pen is pretty nasty and oppressive. It took a lot of courage and faith. And he knew, upfront that I was going to publish every bad thing I could find. Which I did. Every wart is here.
And finally, I wanted to give my honest opinion about whether you can really “be successful in 2-3 weeks.” Obviously, this is not true.
But what is true? For the layperson, that knows absolutely nothing about trading stock options, I believe that you will need to dedicate 6-months of steady interaction with David Jaffee in order to fully grasp and learn what he is teaching. There is a lot of nuance involved in trading options, yet for those who are committed, then they will learn a valuable trading strategy that is consistently profitable.
However, you will need to be exposed to more than just a few weeks of isolated market conditions. You will need to be exposed and have your hand held through some sort of market turmoil. Six months of commitment (and the cost of doing so) should be part of your calculus.
Additionally, I recommend that you avoid using a simulator for stock options trading. Why? A simulator never reflects the actual bid/ask spreads in real markets. A simulator is a waste of time. In fact, it will only give you a false sense of security.
With Jaffee, you will need to arrive ready, with capital ready to deploy. Don’t show up with your plastic gun. Show up with your rifle and be ready to start pulling the trigger on small trades with very limited potential losses.
Thanks for reading. Best of luck.