Transcription
2022 is the reason you are here as a rising star, right? So you start the year with $17,000. We make a high on January 3rd, the first day of the year, right? For the rest of that year, you killed it, and into this year, you've done great. You've turned the $17,000 into $300,000. That's correct. That scale, that's repeatable scale, that's organic growth. And what did you do?
When did you discover Tasty? 2016? 2017? We didn't launch the platform until 2017, but you know, tell me the story. So what I was doing before was a lot of trend analysis, technical analysis—everything you can think of. I was trying to figure out what was the best way to do this, and I wasn't being successful. I would make a trade, and in an up market, for instance, I would buy a call, and I would be wrong. I would be right, but I would be wrong. I guess wrong in the sense that I wasn't making money because I'd be right eventually, but by then, the premium had worn away. Timing is everything.
Exactly. Yeah, timing is everything with that. So then I learned that you can do this neutrally; you can do this by selling options. I had no idea you could do that. It's just a little bit at a time. So, light bulb! Somewhere in that time frame, when you're kind of figuring out how to trade and figuring out, "Hey, what's this woman doing?" and "What is this whole part of the business?" some kind of light bulbs went off.
That's right. By the time I came over here, I had the foundation of understanding what credit spreads were, what all the neutral strategies were. I read some of the big books, like "Options Volatility and Pricing." I have that on my bookshelf still. I understood implied volatility, but I just wasn't putting the pieces together of how to use that strategically and when to look at IV and use that for your timing instead of trying to figure out when something was going to happen to predict the future.
Listen, if everybody who read Larry McMillan's book or Shelly Dayton Burke's book could become a successful trader, you know, there'd be a lot more successful traders, right? A lot of people have read those books, and I mean the same thing.
Yeah. Have you had a chance to read Julia's book?
Yes, okay, great. Yeah, I read Julia's book. It was great. That book is written—I think she has an engineering background, physics—very technical background.
Yeah, she's very thorough, and I just appreciate it so much because I'm reading it, and it sounds just like a thesis. She's got figures and charts and graphs, and they're all mentioned correctly. It's great. I love it.
And then, yeah, so that book, I approached that as trying to figure out how to create a core portfolio. I really gravitated to that section. I read the whole thing, obviously, but I read that section several times to figure out how to get this all into one portfolio to basically trade it like a hedge fund would. How would the professionals do that?
I mean, listen, that's what Tasty has been all about since pretty much since we kind of figured out a set of mechanics that we thought we could build a network around. It was essentially, you know, let's think about this business very differently than anybody's ever thought about it before, and let's build an entire trading foundation and methodology around that. I think we've done that in a really interesting way for the last, you know, 12 to 13 years.
So I'm going to fast forward to 2020, and you kind of come to Tasty with, I mean, I'm just going now just on recollection of your story and stuff like that, but you come to Tasty with a real small amount of money. You put your toe in the water with us, right? Like maybe like $10,000 or something like that?
Yeah, that's right.
Okay, and you say, "You know, you're like, all right, let's give this a shot."
Yeah.
Okay, so take me through 2020 because 2020 was kind of a year like none of us are ever going to forget. The world economy came to a complete stop. We're seeing something that we've never seen before, and in the process of seeing that, you know, people are scared. It's wild. Between volatility, I mean just the size—lock limit down yesterday, lock limit up this morning. I mean, all this stuff is incredible, but it's going to normalize. It always does.
35 days, we're crashing. The rest of the year, we're kind of rallying. I mean, wild swings in volatility. We hit 80 in the VIX, and now you're in your first little—this is your kind of your first semester, you know?
That's right.
So did you survive 2020?
I did. I survived. I'm still here.
So just like you asked for, I'll tell you exactly.
Okay, good idea.
Yeah, so before 2020 happens, we had to talk about the grind up of 2019. After the flash crash of '18, it was just straight up from there.
Yeah.
And it was a lot of rolled positions that I had left over by the time early spring of 2020 arrived. So it was a lot of rolled naked calls, a lot of call spreads that I had learned how to roll, but not like I did through 2021, which we'll talk about later.
But you're saying in 2020 what you had learned was to roll positions forward?
Yeah, I learned that. Actually, that did get me through 2020. So yeah, it was a segment that you did with Tony. You guys were talking about the anatomy of a trade with Amazon. Just like I had known the whole time you could roll up the untested position to collect more credit on like an iron condor, for instance, but I did not know that you could roll out the long wing and roll out in time.
Okay.
So I started doing that with these leftover positions through 2019, and then that really just saved me because I learned that you could just get a little bit more credit, roll things out. You're taking more risk, but at the time, I was just willing to.
You're young. I mean, I'm serious. You are young. You're successful. You can take a little bit of risk. It wasn't like a crazy amount.
Yeah, and that was going back to the whole Karen and the super tour discussion. I mean, that was her approach on losing positions, which is, "Hey, push them out, roll them down and out." Right? You know, essentially down if she short puts, roll them to lower strikes and roll them out in time until you pick up a credit. Same thing on the call side—roll it, you know, up and out.
Yeah, so the crash of 2020 helped me. It brought all those positions that were deeply in the money out of the money and made them profitable. I was able to get out of all those trades that had been just a graveyard of rolled calls and call spreads. By the time March 2020 rolls around, I'm doing what I think is well. I think I'm doing pretty good, and the bond market starts going crazy at that time.
So it was around then that I started trying to short the 30-year bonds.
Oh, so you're doing—you have a relatively small account, and you're doing the ZB's—just one contract?
One contract of ZB options.
That's right.
And well, no, actually, no, just short the actual future.
Oh, short the future. Okay. But at that time, I had already cashed out my 401(k) from a previous job, so this is about a $30,000 account.
So you took your 401(k) and you rolled it into a regular margin account?
Yes.
Okay, because most people, when they cash out their 401(k), they'll roll it into like an IRA or something.
No, yeah, I did regular margin.
Yeah, okay. I like that because that's a power move because at your age and where you are in life, you know, that's the whole concept of really owning your own risk and owning your own future type thing. So I like that.
Yeah, they just seem to hamstring you. I can't do what I want to do. I figured I'd rather take the tax hit and just do what I want to do, and it obviously has helped.
Yeah, okay, so you have a $30,000 account. That's right. We're getting to 2021. This is still—so 2020, the bond market is going crazy.
Yeah.
I figured that the best way to play this bounce would be to short the bond market because I figured while the stocks were going up like they did, the bond market had to cool down sometime, and it didn't.
And remember, there's one day—I woke up, and the bonds were at 191. They printed at 191. I remember the day, and I just wish that—I think it was like March 6th or something like that. It was a Friday, and I just remember wishing I had more money because there are times as a trader when you know this is just a gift that you've got to do something, and I know you know what I'm talking about.
Yeah, because that actually—not only do I—that day was my birthday, and I remember that day, and I was short the bonds as well.
Yeah, so yes, I remember like it was almost like it was yesterday.
Yes, so through 2020, the bond trade cooled down for me. It ended up being okay, but I just—I knew I didn't know anything, but I just had an obvious hunch that this market cannot sustain the rally that it was on. So I took that position in bonds, and I took that money and rolled it into a short position and just a few micros—the mini NASDAQ, the micro NASDAQ futures, and the e-mini as well—not the full contract, just the micros.
That's fine.
So I had a couple of those short and a lot of, again, rolled calls and call spreads that became in the money in 2022, just like what happened to me in 2020.
So I took it—hold on, hold on. Before he gets to 2022—sorry. So you're at $10,000 or whatever it is you opened the account with. You cashed out of your 401(k), right? You get it up to whatever, $30,000-ish?
Okay, save $30,000 in a margin account that you're playing with. You take that $30,000 up to what, about $60,000 or something?
Yes.
Okay, so you did good. So you basically doubled your money, and you're thinking, "Hey, I got this."
Right.
I'm kind of a genius. I mean, I'm just saying this is how our egos work, right?
Okay, I got this. If I can go from $30,000 to $60,000, I can go from $60,000 to $120,000 to $240,000, you know, to $480,000—the whole deal.
And then in 2021, you got slapped, right?
That's right.
Yeah, okay. It was another grind-up year.
Okay.
Something that I still am looking—I'm searching to learn how to handle that situation, which we're not in this year, but eventually, we'll be there again, and I want to know what to do then.
So 2021 is a tough year, and your account drops all the way down. So you go from the $60,000 to $30,000, and then you go from $30,000 all the way down to $17,000.
That's right.
So you basically lost 50%. You lost 50%, and then 50%.
That's right.
So yeah, 2021 wasn't up here. It was the same thing. I had a lot of naked calls that were left over from rolling up the untested side.
Yeah.
We made new highs in the market, basically. I just—I remember learning that it's statistically better to trade both sides.
Yeah.
So if you're going to be short a put, you should be short the call as well and the strangle. However, I feel like you have to be aware of what the market's doing. You have to have some kind of market awareness.
Now I kind of know that in a crash like that, the rebound is pretty tough, and I probably won't be short.
Yeah, because you missed it in 2008 because you were too young.
That's right.
And you didn't really get that 2009-10 rally that, you know, that yes, and then the next 15 years.
But so you take your account—you did all this work now from 2019 all the way to the end of 2021, and you're below where you started from. It has to be a little bit discouraging, but on the other hand, you've learned something.
That's right.
Okay, so now 2022 is the reason you're here as a rising star, right? So you start the year with $17,000. We make a high on January 3rd, the first day of the year, right? For the rest of that year, you killed it, and you've done great. You've turned the $17,000 into $300,000.
That's correct.
Okay, now that's progress. That's scale. That's repeatable scale. That's organic growth. And what did you do? Like, what clicked? What happened, you know, trade-wise? It couldn't just be rolls. What happened? Like, tell me, you know, what kind of products did you trade? What kind of strategies did you use? You know, when did you roll to keep your positions alive? Were you rolling for credits or debits? Like, all these things.
No problem. I was—for a naked—well, I mean, for a call spread, for instance, I would roll out in time and I'd expand the wings.
So let's talk about call spreads. So you put on a call spread. Typically, how far out in time do you go when you put on a call spread?
Oh, 45 days.
Okay, so you stuck to the 45-day roll.
Yes.
How far out of the money do you like? What delta is your short call?
I go 25.
25, okay. And then what delta is your long call?
I make it long, and I make it wide enough so I collect as much credit as I kind of want to. Like, okay, for instance, on a—like right now in an SPX call spread, for instance, I would want to collect $1,000 and take about $4,000 in risk.
Okay, so you're about 80% probability profit type of thing.
Okay, got it. So you're right at that 20-25 delta.
Right.
If the market went up, were you rolling because the deltas changed, or are you waiting until you get to 21 days?
Waiting to get to 21 days.
Okay, so you were pretty consistent about that.
Yeah, and a lot of these were in products where you didn't have to worry about being assigned, like SPX.
Yeah, exactly.
So SPX is great for that. I remember that segment with—you seemed very perturbed that he was doing that, and he was obviously getting under your skin, but I understand why because it is a locusts. It's all just show for the—it’s just for the show.
Okay, yeah, he's never gotten number.
Yeah, it is obviously a low probability of success method, but it gave me some hope. So without searching for—in that time, it was hope, and it gave it to me, and it was able to sustain me through just a straight-up market.
So then when 2022 happened, all those positions again became out of the money.
Yeah.
They became profitable. I was able to close them, but at the same time, I was still short the micro futures.
Got it.
And you had a big, you know, 20% down move, which probably paid nicely, right?
And then the subsequent rallies too. I was short. I was not long in those rallies. I wasn't positive delta, but I was significantly smaller in size.
Got it.
But were you doing any naked options at all?
Not as much, no. When I had the $30,000 account, I was still trading naked—Tesla, for instance. I remember I was very scared because Tesla's call strike was breached, and I didn't know if it was ever going to come down. It did. I got out, but it scared me more than it does now.
But now I just—I love the futures. I love trading naked futures options too, but our equities are just—I mean, yeah, securities are—I don't know. I don't feel like there's enough credit sometimes.
You just like the additional buying power.
But you know when you're over $175,000, you can go portfolio margin, and then the equities essentially become the same as span margin.
Yeah, so it doesn't—you know, now you're at the point where you can create—it's just more opportunity because basically everything looks like span.
That's right.
But so talk to me about those rollouts. So like, were you always rolling for credits?
Yes, so you always roll. So even if you were—let's say you were short a spread that was not in the money but that went against you, and you couldn't roll the same strikes for a credit, what would you do? If it was a call spread, would you roll it out to the next month or two months out, or would you roll up in price? Like, how did you get a credit all the time?
I would roll out in time, keep the same short strike, and I would roll the long strike up.
Oh, so you would widen the spreads?
Yeah, widen the seat.
And end up taking more risk.
Exactly, yeah.
Okay, that's—and that's why you didn't like it.
That's exactly why I didn't like it because I'm not somebody that—I don't like to add—you know, you were betting that eventually you were going to be right, which is a totally reasonable bet, but since I'm not—since I've taught myself not to believe in mean reversion to price, right? It scares me when I have to—why add risk to an already losing trade, right?
So I prefer not to add risk and, you know, try to either roll out same strikes so I don't put up any more money as long as you can roll for credit. I don't care if I have to move it out further, move it up higher, whatever it is, right?
Or pay a small debit.
Right.
So that's what got me to where I am today, and I haven't been able to keep the profits through this year. And then this latest up move has been not as detrimental as it could have been because I'm more diversified, correlation-wise now.
Yeah.
For instance, I'm trading other products like natural gas, oil. I've been trading oil for the past two years, and it's been amazing—trading both sides of that market.
But yeah, it's not bad. I think I'm going to have a good year again. It's not as good, but you can't have a year where you make—I don't even know how many—I don't even know what is that—that's 200%, 300%? That's like three or four hundred percent.
I mean, your year was a crazy outlier last year.
And you can hope to, you know, like it'll—it's going to—as you get more money, your returns will normalize, right?
But you can still—you still have great years, which is not going to make 400% or 500%, or probably not.
And that's not expected.
And you know, I hope the United States Treasury isn't expecting another generous donation this year.
As I got so—how do you go back to work as an engineer? Like, how do you go back to your day job? Because, you know, you're trying to do all this.
Yeah, this is a tough—I mean, because you're pretty active, right?
It's actually not as hard as one might think. The market's only open a certain amount of time, right? You don't have to do this staring at a screen all day.
How many trades do you think you make a day, a week, that kind of thing?
Not that many—maybe one or two a day.
Okay.
I'm not as active as I was a few years ago.
Okay, but I'm still doing well, though.
Yeah, but you're still participating every day, and you're watching the markets all the time.
Oh, absolutely.
Yeah, yeah. It's working and doing this at the same time is very doable at this point.
You believe it is repeatable?
Yes.
Yeah, I mean, it's a little while, of course. We all do here. That's why we're here. But I'm just—you know, sometimes when you first start, it's a very difficult concept to grasp, things like that.
But do you think that you're—are you going to try new strategies at all?
I'm trying to right now figure out how to do this with the top dogs portfolio method.
Sure.
So the 20—I think 2016, the very first one where you're long futures, short options against them. I really like that portfolio, and I've dabbled in it this year and like trading uncorrelated products like gold and oil, natural gas, equity in good ranges—everything but natural gas. Everything else has been a pretty good range, right?
Yeah, so that's what I'm learning to do now or trying to figure out how to do as a core portfolio.
Thanks so much for making the trip up here to Chicago, and I hope you enjoy your stay in this amazing city. I'm glad you came to the office and shared your story with us. I think everybody's going to love to hear it.
Yeah, thanks for having me, and thank you for listening because it's lonely out there as a trader. You can't share your successes and share your miseries with anybody else.
I know. I know. That's why you just gotta move here.
Yeah, thanks, Matt.
Thank you.