Transcription
Okay, everyone. We're back. The long-awaited moment just splitting Conor's 100 grand portfolio. Um, he's thinking about leaving his job with the rate of return he's been realizing.
But, uh, so kind of what we'll do here is this would be like the absolute max size we kind of ever recommend people to run, and we obviously expect the, um, draw down to be larger in the future and then the returns to be lesser. So, kind of the logic behind this is one thing we know is going to break down is going to be the correlation between them because they are very uncorrelated, um, basically investments in general. So that means, you know, we're running these trades. We expect this max draw down to raise because the path of us making money is going to vary basically into the future and over time. And then this, like, we're not going to hit that same return, but we do expect the return to be pretty similar, um, over time. And then we also think that the path of this could take a little longer. So this is non-compounded. Um, so obviously, like this is, you know, the portfolio is basically, you know, almost three times as large. So this actually ends up being like a 21% return. So it hasn't just completely fallen off. The expectancy is still relatively similar. Um, so just kind of note that. And then you can see basically from the linear and the log scale, we have flattened out a little bit, but, you know, it's still, um, pretty consistent what we believe. And also, like our draw down ratio is still good.
So, kind of what I asked Connor and Jordy to look at is we're going to use kind of that core four thing and then we're also going to say, okay, this trade is good for the per, for the, is a good aspect of this trade individually, a weak aspect of this trade individually, and then a good aspect of this trade, um, basically in a portfolio, then a weak aspect of, of this trade and portfolio. So, if you kind of want to take it off, Connor, uh, you could kind of talk about these trades and most of them have basically been trades that we've already used in our prior videos if we just combine them in a, um, more specific size basically.
Yeah. Honestly, I just kind of kick it off by, if you like, when you go and we share this for all the viewers, you guys will be able to go look at the trade blog. I feel like our portfolio has pretty much a very similar theme throughout it. Um, we win a lot and when we do lose, we do take decent losses, but the amount of wins we have that we come back from those losses very well. So, just kind of starting out looking at the 932 trade. Um, looking at the call side, the good thing about the call side, it does have a high premium capture, does have a low draw down, does have a high win rate. Um, and it is trending up for this year. So, I felt like that was pretty good for us. Um, if you just look at the graph, I think it's hopefully, I mean, if you look at the graph, you can see that could tick down, but I think it's still on the uptick right now. So, it's been pretty good. Um, the bad thing I would say that this trade, just looking at it in trade and watching it live, it does usually perform worse than the put side. So, we do usually see more draws from this trade than we do the put side. Um, but I would say the good thing about this trade for our portfolio, it's just balancing out the put side as well.
Yeah. And kind of that, what I want to say about, yeah. Yeah. But sorry, go ahead. Um, kind of with that too is like we just need to understand that like when we have a 90% win rate trade and then we have a stop off that's our average loss is seven times larger than our average win. Like it is expected to go two or three months without this, you know, making money and basically breaking even. But you can see it's pretty consistent and not losing money. And it's like people will say, "Oh, this trade doesn't work." And it's like, well, you're only making one occurrence basically every other day. And then with that type of loss multiple, like you need to understand that this trade's going to take a lot more time to pan out and probably will break even half quarters. But you may have little draw downs here and there that seem pretty quick, but it's not as, it's not sustained for super long periods of time that you're going to be in these giant draw downs. You may go draw down, take a while to get back up, draw down, take a while to get back up until you finally go, you know, in a nice like four-month streak like you are here where you go from the beginning of, um, uh, the year almost all the way for like four or five months, basically three months without losing. So, just kind of something to reference.
And then what do you have, Jordy? Well, what I was going to say is that the, I still struggle with the max loss. I mean, I know that's what's going to happen because of the high win rate, but when you're trading and you have one of those days that it, you know, like it just goes up, it's still a struggle. So, that's definitely the bad side of it. And you really notice when it's on a screen like that and you see a little dent on the graph, you don't care. When you're trading it and you see the loss that day, it sucks, but that's the name of the game. So, yeah, we just have to let with that as well.
Jordy, I put that in my notes. I was like, the one thing that it did scare me a little bit was how big the max loser was versus the max winner. Um, but it does win a lot. So I think the compound could come back up, but like you said, Jordy, like there's going to be emotional, there's got to be a lot of emotional bias with trading with that for sure.
Yeah. And another, yeah. And we tried to cap the max loss and we couldn't cap it. I mean, we, I tried different bits levels, this and that. So, there's no way to make it. I mean, there are ways, but then you have less occurrences, you have less wins. So, I think that's what we're stuck. I mean, not stuck with, but I think that's the optimal point. At least we couldn't find Connor and I a better trades.
Yeah. And another thing with this too that I want to bring up to people is like people may see these returns and just be like, I want to run it now, but we've been running all of this stuff for now almost a year. So like we're very confident that like this is our actual stop-loss data. We've checked these trades quarter after quarter and we know these results actually match. So like this is the part of the forward testing that's really important and why it's taken kind of so long to release this.
Um, next trade, very popular reverse iron condor. Um, I'd kind of like to hear your guys' choice on this and then also, um, you know, why you choose 30 wide instead of delta or kind of what your thoughts are behind that as well.
Um, I think for us, just like the 30 wide, um, we're just, it's not super conservative, but we're the theme of this trade was us to do the forward testing, be pretty conservative. So I would say that's why we kind of went with that wide and we didn't want to go super crazy with our buying power on it. And, you know, just looking at the trade, um, and we're looking at the trade, it's performed really well in the past. Um, and I think it's a really good fit for the portfolio just because it does the inverse of the other condor. You know, it's always good to have something in your portfolio to be able to capitalize on VIX when it's up. And I mean, if you look in the trade log, it's performed pretty well. So, like, um, there's some wins that it does have. It obviously, there's losses, but there there's some times where we're able to make some pretty good, um, wins off of it.
Uh, I would say the bad on this one, it is on a downtrend sometimes and it really, this year it hasn't performed the best in 2025. You know, I don't like to just only look at '25 because if you look at the past data, it's performed well, but this is something to be aware of that caught my eye, like, you know, do want to kind of have my hands on this trade this year, just kind of babying it a little bit, but also not forgetting the past data either.
Yeah. Another thing with this too is like, uh, this has actually been in an uptick recently since June, um, when we updated this backtest. And a thing to note with a trade like this is like, it's a very nice diversifier because now we're never not taking a trade when the VIX is up or down. And also, um, in regards to this, it's kind of like we've diversified our way of collecting volatility risk premium because this one is now buying options instead of selling options. So, it's kind of a different way to exercise our thoughts. So these should basically at least, uh, balance each other out. Like, if you guys have ever seen engineering videos of like large buildings, they have what's called basically like a mass damper in it. So like when the wind pushes the building and it moves, there's a counterweight that will move inside to kind of offset that move. So this is almost more of the goal of this trade is with both of them combined and we'll kind of get a smoother line even though it may not be quite as steep. Um, but by doing that, we are using our capital each day and it should be more consistent over time.
Did you have anything, Jordy? Yes. I wanted to say that with this trade, I still struggle and we've had lots of discussions whether to put the short wings or not. So, cut the max loss or not. So, it's a trade-off whether we move more on a daily basis because we keep selling those little wings, or we just, when we have a huge big day, we just don't cap the upside. I'm still struggling with, you know, we've decided on this one, but that's, I just wanted to say that there's the trade-off that, you know, it's still uncomfortable for me to decide on. You know, it's, I see both sides of the coin and we decided not with wins, but I don't know. I'm still capping the max win is not very intuitive at the moment, but on a daily basis, it feels better.
Yeah. I mean, basically what that does is like our premium capture ends up being the same whether we cap it with selling wings or we don't, but the path and losses day-to-day are just more controllable. So, it's basically, um, like a little more of a Goldilocks thing. And then like, of course, if there's some black swan move, this will look like it's underperforming for the period, but we do believe it's kind of priced in. It will revert back, um, over time. So that's kind of our morning suite.
And then I would say like our next one that we kind of used to hedge, we'll just go in order here, is kind of our opening range breakouts. We have the call side, um, and the put side. I know you guys have worked on these quite a bit and there are two different iterations and flavors of it. So, um, feel free to take it away, Connor.
Yeah. Um, just starting with the bearish side. Um, and sorry for reading off my notes over here, just trying to keep it all in order, but it really is, if you look at, I've been, I dove into the trade log on this one to kind of give it more just context what I'm saying. And this, this trade is pretty much winning every day at like $50 a day. It does lose, but, um, and it does take big losses, but I mean, if you look at the trade log, I mean, it is winning like crazy all the time. It can go on some streaks. So, like, kind of what I see with this is it's just like mentally, this is a nice even out to have something that's a really high win rate. We obviously don't want it to be the main driver of all trades that we take. Um, but it's a nice kind of even out and also, um, this will help offset when we collect a little more on the put side for it open as well if it goes down.
And, um, Jordan, what I'll say, yeah, I mean, I'll say that to do it mechanically is not that easy because you need to do the web hooks and so some brokers, they still don't support the settings. So it looks nice on here, but, you know, it's a challenge. Like I use interactive brokers and it's not immediately, you know, um, available to trade. So that's also something to take into account. Sometimes the silliest thing like that makes the trade not tradable, which it sucks, but that's the way it is. Logistics, you know.
That's a good point. Yeah. And on the bearish side, I was just going to say honestly, I couldn't find anything bad about that trade. Like that trade was a solid freaking trade. Like it was basically, I mean, on the bullish side, sorry. On the bullish side, if you really look at it, you're getting a lot of the high win rate, but you're getting bigger wins, too. Like the bearish side was like $50 wins. This is like $200 wins, and you're not seeing that big of losers. So, like when you lose, you're easily bouncing back after four days. And you're just, I mean, it's just honestly, I think it's probably one of my favorite trades of the portfolio when I was looking at the trade logs.
Yep. And then we'll kind of go without a doubt. Yeah, there's one. Best one. And then we'll go to later in the day. I think we can kind of talk about both of these in one. So this is our limit down put, just something mechanical that 325 at every day we're selling a $1 put, 2x stop loss. And then we have basically, you know, two times here separated by an hour. Really playing a hopeful mean reversion with a big stop loss with a 400% stop loss and a 650% stop loss. And this is really a trade, um, that we're using and is a big driver of profits as well.
Yeah. Um, just to kind of kick it off on the power hour trade, it's a great trade. It has thousands of occurrences. So if you do lose, you have plenty of chances to win back. Um, I would say the bad thing, most of our wins are like, you know, $200, $300 wins. We take fat losses on this one if you do lose. So that's the scary part. I mean, I know it shows there, but like even when you're looking at the trade log, you're like, "Crap, man. That that that's a pretty big loss." But then you're winning a lot, um, to be able to make up for those. So, that's one where you're just going to have to trust the data. I feel like with like in real life while that one's trading. Um, but it really has been a big driver to collect multiple $100 days where you're just, you know, just capturing a lot of premium there. Um, but that's what I had. Jordy, I, I know you see this is one of your big in your portfolio as well. So, I'll kick that off to you.
Well, a big learning for me is I used to do like four entries at 2, 215, 230, and 245. And then I realized that some of them were very correlated. So why was I doing four entries if I could have done two contracts and two contracts? So basically we then found these times that perform even better. So I had never even thought about, I thought that just for having four entries, I was more diversified and it wasn't so because doing the Chimera Lab thing, I realized that they were correlated at pairs. So that was a huge learning for me that it never even occurred. And that's when you and I, Connor, were saying that building the portfolio is the magic sauce that very few people understand. And when you see the correlation, you see, oh my god, what the heck was I doing because I'm not diversified just because I have more entries. So by picking these two entries, that was a huge win, I think, for the portfolio because they're not correlated. These two order are less correlated. I mean, not to a certain degree, everything is correlated, but way less than before. So that was amazing to discover that.
Yeah. And this is also kind of nice that it's very, like we are executing this every single day. Um, maybe we'd reduce the premium a little bit in lower VIX, but I've tested it, you know, in lower VIX also and it still works fine even though you may be trading basically straddles. Um, but this is a good way to outlay premium and plan on the amount of buying power we're going to use and it's like this trade does amazing on Friday, but we just have really no interest to filter it like that because it does make money every single day of the week at similar levels.
Yeah. Um, the next one I'll kind of bring up too is like we've been running this one from a while, but just something to note when we do this one, it's really capital efficient. It's great. I like it quite a bit. However, the problem with it is like you can run into strike conflicts. So, if people didn't want to run one trade in the portfolio, I would recommend this one because it can conflict with the trades you're putting on, um, before a little bit if it's sharing a strike because they're all kind of close to the money, especially in lower volatility, but since it has a minimum premium filter, it'll probably filter out and this is not a big driver of a profit. So, just FYI with this one. Um, this one is in here, but feel free to drop this one. It's just making it more difficult to trade and causing conflict of strikes.
I, I didn't even think about the conflicts of strikes one. Mark, that's a good point. I was looking when I was looking at the bat on this one, too. I was like, it was, it does, I feel like I could get easily in the hole on this trade sometimes. And it, I, I'm not as seasoned as a trader as you, obviously. So, I don't, I'm worried about my emotional bias on this one. Like, if I would want to just kick this one out because like it feels like it does get into, I would be worried about getting in the hole on it.
Yeah. I mean, this is sized very small, so we don't need to worry about it too much. Another nice thing is it does get out at like 350, so you don't have to deal with the big moves at the end of day, which is nice. Yeah. Hold on to contracts and stuff. So, again, diversifies us a little bit. More of an example of something we've been running for a long time. The return on capital is great. Um, the risk adjusted return and running this large is not necessarily the best trade.
And then we talked about this one last week, but this is basically like, hey, how do we get long the market in certain, you know, environments basically. Uh, and then a thing I'd like to put out, and you can talk about this too, Connor, with position sizing is like there are well over 100 trades during this period. It's very consistent around like, you know, 40% premium capture, but we basically only want two open at a time. So when the market goes up, we're still making money because I know that can be really frustrating when you trade all in the open and the market rips up and you end up losing money that day trading options and you're like, what? This sucks, you know?
Yeah. Yeah. When I was looking at it, I was kind of like, this is either a a kick in the nuts trade or a really nice gift trade because like you, it doesn't trade a lot and you could, it could save your month with a 100 grand portfolio if you're trending down and you get a $4,000 winner, you know, like that could be awesome. But then I also saw that like you could get hit with a $4,000 loser. So it's like, it's just being aware of that like there is way more winners on this one that than they were losers. Um, obviously it's a 92% win rate trade. So like, but just also be aware that you could get a nice little loss when it does lose. Um, as you see the max wizard being 4,000 there. I mean, it does reflect in the trade log as well. But again, I think this is a good one to add to your portfolio if you just want to have an easy fat win like maybe once a quarter or something like that, you know?
Yeah, I basically kind of view it as like you get to have your market exposure and also be able to trade options. So, it's like you can have your cake and eat it too. And then another thing is the max draw down may scare a lot of people, but this also includes, I don't think a lot of people know about this option Omega, but this would be like intra-trade drawdowns. So basically like at the end of the day, we could still be in the position and we were marking down at 8.8%, but that trade ended up coming back and making money in the future. So that's why you see with trades like this, you have this really, really high win rate, but you also have this big draw down. You're like, oh, this isn't worth it. It's not like zero DT. But the opposite of this is like there's no black swan risk because it's bought option and then you are holding it overnight. So this is basically like your stock market portfolio going down 15% but you never sold it. Again, mentally different shift, but the thing is, it's like we can get exposure to the market for one-tenth of our buying power and have the other 90% to trade options, which I think for a lot of people with a 100 grand portfolio, it makes sense to still have overall market exposure because the index going up works. This is a little curve fit and, you know, the recent environment has been bullish, but this is meant to replicate the market, not really be curve fit. And if the market goes down, obviously this isn't going to make money, but, you know, you're not necessarily making money if the market goes up and you're trading zero DT options. So this is what it's trying to do is mirror the market. Makes sense.
I mean, I would say this is the trade that intuitively or emotionally I like the least because I've been so conditioned to say buying options into losing game that even when I see this, I see not a lot of occurrences, I see the max loser and I go like, whoa. When we're buying premium, you know, looking and listening to Tasty for so many years and listening to that's the trade that I find the most difficult to stomach, but I understand that that's what the back test shows and it's valid. So yeah.
And a way to think of it too is like this could be roughly, you know, seventh of our yearly profit if it completely goes against us, but it can also be a nice boost too. So it's like the sizing is really what's important with this in general. Um, and like if we just compare that to the index, the index took a 50% draw down in 2008, took a 34% draw down in 2020, to 20% draw down in 2022. So like again, we're trying to mirror the market with this one. We're really not making anything, we're just using options strategically to mirror the market. But kind of any.
Uh, the other thing too is kind of with this is we'll share this with everyone. Um, if you guys, we'll obviously go over this portfolio probably quarterly now, but if you guys have any more ideas for Connor and Jordy videos or things you want us to cover, um, you know, we are, we'll still show some trades and break down some stuff, some concepts, but basically, um, this is a good portfolio. I think everyone can feel free to grab and run at your own size. I definitely would not recommend running bigger than this. I would recommend actually probably running it at half the size until you feel comfortable with executing this for three or so months. And then do you guys have any more questions or comments, Conor, Jordy?
Yeah, I would just say just to Mark's point, just make sure you're confident with your sizing before you increase this one because, you know, just as kind of to Mark's point as well, we've been running this portfolio for a year now. So, like we've, don't just go all in and be emotional with it, you know, forward test it and just, yeah, just mirroring what Mark's saying on that.
Sweet. Well, appreciate everyone for tuning in and we'll continue to make videos and if you guys have any ideas or concepts you want us to cover, we will do that on the next one. We'll see you guys later.