2021 Karen Bruton talks life and Trading with Dan Sheridan

all right well welcome everybody today uh i'm dan sheridan and i'm thrilled to have uh my friend uh karen bruton who uh is an option trader and for for many many years and has done very well uh she's a north carolina fan which is okay i'm a depaul fan and you know we win every 20 or 30 years a few games north carolina wins every year so that's okay also we both love college basketball and uh so we're here today we're gonna talk about a few different things first we're going to talk for you know 15 minutes or s so on the whole topic of selling strangles selling an out of the money put and call uh selling puts selling iron condors just that you know from a big picture perspective how karen did it what's her thoughts on it and then when we're done with that we'll get into a little bit on karen's journey from the business world into trading even though trading would be considered business world wouldn't it yeah i guess um and then we'll talk a little bit about uh in her words some of the things with the sec and then her book but um uh and we'll get a little more i think when karen talks about the journey she'll talk a little bit more about herself and everything to me personally she's become a good friend we don't see each other uh in person much but we we talk and interact and uh i've um got to know her more over the last couple years i'm thrilled to we're inten you know she's in nash is it nashville yes at the suburb of nashville brentwood okay brentwood and she's been there so um so we're going to talk strangles and short puts and iron condors which karen kind of did a lot of that type of stuff and then we'll get into the journey a little more about karen um but maybe starting out carol why don't you in the terms of strategy from a big picture perspective talk a little bit about how you um and again karen was managing a big account so it's different than somebody managing a ten thousand dollar account doing an iron condor maybe talk about how you that whole concept of selling premium well um you know i i learned i went to a lot of your seminars i went all over the country and uh went to so many of your seminars and and we never met i know you know we're usually yeah we didn't from coming to the seminars i remember i would do seminars at different places but we never really got to know each other at the seminars it was more after so that's interesting so so you were learning so you that's when you were without getting into the journey too much you would come out of a would it be fair to say an accounting background or an executive i was a cpa uh i worked in public accounting and then i was a vice president of of the two last companies i worked with okay so um uh i had a high position in both companies okay uh but i was learning how to trade and um thank you for that because you taught me how to trade but then i just developed my own way of the trading that made me comfortable can we say that made it better i always say this it's like the person you know i always get to say i always get to to to say well i taught pete nigerian on cnbc's fast money when he came to work with his brother john and i always tell people you know what whoever coached pete the little bit that he needed he would have been a heck of a you know it's like coaching kobe bryant in high school you know and with you i coach you but you know let's be clear here i appreciate that very much but um i think whether dan coached you or somebody else you definitely you you were it would shock me if you would not have been successful even with someone else because you're you're you you had a lot of uh uh you would have been good but anyways thank you but go ahead go ahead and i was still vice president of my company but i went through about two years of just learning uh teaching myself this is not an easy thing to just uh read a book and and it describes do this do that do that uh if you don't know what you're doing and the market goes against you someday oh you're going to lose a lot of money so you need to understand and and just go through a lot of training before you start putting a lot of money in the market at trading options if you want to buy stocks that's one thing i don't do any trading with stocks um i i stopped that a long time ago and now i i just trade options what's the main reason would you say that you stayed away from stocks uh well i learned i uh had a lot of apple stock when steve jobs announced he had cancer and then i had a lot more of elon pharmaceuticals in ireland when they announced uh i think the treasurer was uh monkeying with the books okay um so i lost a lot of money then okay and i just stepped back and said i neither neither i need to learn from this and never do that again or i need to quit and i decided i wanted to learn from my mistakes and keep going forward and that was before i ever met you so you have good risk management lessons before you get in yes and yes okay so then you you started your journey into options and then how did you settle into the strategy that you used to do and why you did that versus in many strategies out there well uh i was approached by a lot of people who wanted me to invest their money i started small with just uh handling people's money that i used to report to and friends kept coming in and asking me uh because i was making a good return for uh the people i was investing for and people just kept coming and asking me asking me and asking me so it just moved from 600 000 to 200 million in about a year and a half uh quick wow yeah that's like beverly hillbillies that's a quick one yes wow i never uh they made the the uh biggest year we had uh the returns to the investors uh was a 54 return the smallest we never had a losing year the smallest year was a 14 return wow we usually averaged uh uh about 25 return a year in what year and i was trading very safely and what years did that encompass 2008 to 2016 okay 17 2017 eight to ten years or so yeah tell us a little bit about you know the core strategy you would do and your philosophy just kind of how you approached it and and also you know let's face it it's one thing to trade a strategy you know for a hundred grand you start getting up in the millions you better have confidence in what you're doing and you better have a plan i do very similar to what i did back then um i trade very to me it's very safely uh in the tortoise and hair race i always describe myself as a tortoise because i always make it to the finish line i'm only trading options i trade about 45 days out because the extrinsic value in an option starts expiring just trimming down and the extrinsic value completely goes away within about a day of the expiration and i'm my goal is to make a minimum of two percent return on my the total investment that i have uh not just what i have on that position but the total fund that i i i'm trading okay so um two percent two percent a month i got you and uh i'm doing yeah better than that this year are you doing similar strategy now to what you were doing are you tweaking it because it's less capital than the two than you were doing or are you well what i do uh what i just explained i do it every month and i just put on a position uh for june the 30th this morning okay um so i do that but i'm experimenting uh okay um right now uh little by little by little and um i'm trading um i put on a position today that will expire tomorrow and then i'll put on a position tomorrow that will expire monday and i'm making [Music] my return has gone up from about two and a half percent to uh last month it was a little over four percent okay so you're doing a little more some shorter term stuff too yeah uh it's expiring in a day but i'm putting a put and a call spread on but i'm uh trying to put the spreads out at least 70 points okay so you're doing an iron condor yes um maybe a small a small credit 70 points out with two days to go so which easily or most of the time will handle the expected move for two days so you're outside of that maybe uh maybe you're selling a five to ten delta caller put something like that i'm usually selling a uh well i go by the in the money percentage so that that corresponds to delta but i'm usually around uh two percent uh two or three percent delta at the bit at the most you're you're way out there yes i am i wanna i wanna do this safely that's interesting so you get back in a second to what you were doing with the big fund but as a retail trader more now yes so you're doing maybe a two-day uh a two-day iron condor very far out of the money first you're making it i mean two percent a week or four percent a week is is excellent you know i mean obviously the probabilities are going to be very low that that you're going to get in trouble but let's say one out of 20 or 30 or whatever times what's your risk management basically i've only had one call get in the money okay and i just moved it forward and i didn't make uh i just covered it with the put the cost of moving it forward and moving it further out okay uh so i just didn't but i just rolled it forward from a wednesday to a friday okay a couple days further i'll give you a couple of days further out so i didn't make any money off that because i covered the cost with the put i'm still experimenting with this sure but it's fascinating to me yeah how much money i'm making experimenting with this well yeah in in lately in the market it's been you know we've been pretty quiet um pretty range bound in spx and rut lately so keep going right keep whiffery would say you go girl yeah keep going but when you look at something like you're doing way out of the money i mean you're talking you probably need the spx i'm just guessing what would you think five percent move in a week i mean you're going to need a good a heck of a move to to get into trouble yeah yeah and it's something like that it's just yeah i mean it's it's you can almost just close it i mean if it goes against you and you're just taking a few losses a year you just have to make sure those laws don't knock out too many winners but yeah i think that's a good and i think you have a good personality for that i'm i'm a little more risk of you know when i get that close i think i break out in hives or something you're you're just themed to me as a personality you can handle stuff a little more you know you remind me you know what like mark fenton who works with me he can you know he can handle that more i'm just a little more risk-averse and um even though i know that's more you know when that's more enjoyable it keeps you well uh i i don't look at this movement as being risky uh i've got a different personality and i get i don't get scared you know when steve jobs announced he had cancer i panicked i've learned not to do that because i know what i'm doing i just get annoyed when one of these positions gets in the money it just annoys me but isn't it isn't it refreshing playing with the vehicle like i mean we're pretty exclusive with spx and rut and yeah obviously if someone wants to do uh futures or futures options that's fine but you don't have you know when spx you have 500 stocks there rut you have 2 000. you're an index you're right you don't have to worry why would i play a stock for the most part i'm not saying we never do but why would you mess with that right when something right like you said apple i mean this isn't like uh you know enron i mean it's a real company apple and not that enron wasn't but um so that's uh good i was a question said do you use do you sell both puts and calls iron condor at that two to five delta level i think you said you did right yes uh i i do uh i'm um i don't like selling calls but i'm practicing i'm experimenting with this so this is working well my normal uh position is about 300 or 400 points out of the money for puts i've just i just put i just placed puts on uh but i'm experimenting with this and and i'm having a i'm having fun you know i'm a big believer in diversifying your duration and we do in the community we do a lot of 30 to 45 day stuff but then the fun part you do a lot of 10 to 15 to even closer and that's in my hearing yet you're doing short term stuff but you're still doing like you just said you'll still do a little some further out stuff right yeah right right you're further out stuff going back for a second to um um oh one more question somebody said do you just close the winners do you let them expire let them expire okay i never spend the money to i never spend the money to close the winners okay and you're not getting that much of a credit you bro but i agree with you right you leave it alone now the loser just leave it alone yeah the losers you'll roll to the next like two days out or something like that how far will you kick the can down the road if it keeps going let's say we go up and it keeps going up you kick the can two days further out will you keep kicking the can or you close it at some point uh um i'll answer that question when that happens to me it hasn't happened to me yet that's a good problem yeah i i had to put on my position early today because of this interview so i put it on about uh 12 o'clock i usually don't put the position on that will expire tomorrow until about two o'clock uh um because the market goes up and then it comes back down and then it goes up and then it goes back down all in the same day and i'm not used to that uh much market movement in a in a day and um i've experienced a couple of times at 2 30 the market just shifting and and just going what you know strongly the other way right right what do you know so in the far give me a couple thoughts on when you say your core strategy when you were managing 250 million give us a typical strategy you put on a typical month are you selling just the puts and why or the puts and calls and why you didn't i mean i know the answer because i talked to you a lot but i know you didn't do the iron condor give a little bit why and why you just stole the foot and not as many calls and why you didn't turn it into an iron condor and what you did each month because you're getting 250 million dollars i always thought you know you can't get as far away and make money on the call side like you can on the put side so i was always more attracted to the put side but uh i was trading safely but i was not putting i was just selling excuse me naked i was just selling a put i wasn't put buying a put and and like i'm doing today uh i'm i'm doing 10 point spreads okay sometimes i do 50 point spreads but mainly i do 10 point spreads um still you do 45 days out today or something uh yeah and i and and i put a spread on okay so when you were doing the big account you might spell just the puts and and maybe a little more why did you just sell the put versus the oh you mentioned because the call side didn't the calls are are much more dangerous and and you can't get as far away and make as much money on the call side as you can the put side that's right so i was getting uh rather than the spreads i'm doing today and making three dollars a spread i can go much further down and just sell the put and make three dollars uh so i was trading that way back then okay so typically on the big account you would trade maybe 45 days out and sell like five delta foots or ten delta puts uh uh yes uh more toward the five delta okay five to ten but i was trying to stay safe and trade the five delta puts and it worked most of the time did did you scale them or would you okay you you because you had to i mean you have this plan you knew how many puts you were going to sell each month did you sell them all at one one barrel or did you i'm going to sell about 10 000 or whatever i traded uh once i got going i was trading puts every week but i would put a 100 puts on for this week and 100 puts on for next week and 100 puts on for the next week and a hundred puts on for the next week so it ended up just rotating uh the puts that were all out 45 days so come some would come off and then i'd put put the 45-day one in advance uh i just do that over and over and over and over again and what was your main risk management tool the the few times that those would get tested what was your basic plan when the market started to crater well um i i remember 911 and the market crashing and and i went through several crashes i would just move the positions out two and three months because i knew the market would eventually come back up and last march 2020 it it fell significantly and it just started working its way back up okay so you will like move it out instead of move it out maybe a couple months with the high volatilities and wait it out okay laid it out yeah um i wouldn't take i i wouldn't just take losses for and the only thing that i uh when i had positions out that far and somebody wanted to leave my organization i it depended on the percentage that they owned um if they owned a very small percentage and i calculated what what those outlying positions would cost them if it was just a couple hundred dollars i um they were just going to miss out on the profit that i was going to make um people who owned a bigger slice of the pie i i told i would either i would um go out and calculate how much they would lose by shutting those positions down and how much how many many positions that they owned and shutting them down and i and i would tell them that they're going to get hit with that loss most of them changed their minds oh i bet that i bet they did i bet they yeah so you didn't really so you would roll you would you would more or less roll them out did you do it when the delta let's say you sold the five delta did you do it when the delta hit a certain point or what was your trigger point to rolling up um my my trigger point was uh on the day they were expiring i'd watch them very closely and and if if i knew if the market got within uh 10 or 20 points i i would just move them but i only had to move a couple of positions several times and i moved them way out and when they expired they were all they were all making money okay okay how did so i never damaged any of my investors by doing that i saved i saved my investors by doing that sure how does how would you say volatility level effect how you set up trades or how did you use i remember one time you were telling me we had a conversation some years back and vix was really low and you were buying some insurance or something how did volatility play into your decision making maybe high vowel low vowel how did you how did you play with the whole volatility game uh i've never i've never paid any much attention to volatility because i'm playing so far out that's right it really doesn't matter to me okay so you never really bought insurance or anything back when i had that 200 million dollar account i would get insurance from time to time i would buy a put lower so that it would um if it fell in the money and i didn't do anything with a short position that i'd only lose so much money so maybe would you buy a put when the vix was at like a lower level or would you buy a put what would make you think of insurance uh when the market was going down and getting closer and closer to where i was oh i got you okay i got you so you didn't just buy it at vixx got to 10. you didn't just no no um i i know what the vix means but i never pay attention to it okay so so when the market so there wasn't um one question says was there a bearish market condition that you didn't add trades did something is was there anything that kind of hey i'm not going to sell puts this month or this week i love a bearish market because i can get lower and lower and lower and make money so when the market's down i can get three or 400 points lower and make money see that's a great point when we talk credit spreads students always say well boy the market's down i get scared and i try to get the focus on you know the real plus of doing put credit spreads like let's say an spx when the market's down sure you get a better credit but you know vixx pops four or five points you might get an extra 70 or 80 points further out and that's plus so it's trying to get the attention of the student off of the you know yeah it's alarming when the market drops fast but hey mr market is giving you more room which is a positive um yes but i wanted to transition into your journey a little bit i mean you've talked about your journey a little bit maybe kind of however you want to do it you know my my journey i look back writing this book forced me to look back over my entire life and i saw the pieces and parts coming together um let me interrupt you before we get into that just so people are so that karen has a book coming out will be called the lamb of wall street is that correct yes and the book is coming out oh thank you the lamb of wall street karen bhutan and she's going to talk about it when will it be coming out about november the 9th it's with simon schuster and it's coming out november the 9th but it's up uh you can go to amazon.com or anything and pre-order it okay good okay all right now that we at least let them know coming start back again to like the journey the sec and then the book and how that all weaves together your non-profit and everything i knew i was being called by god to quit my job and follow him and i was a vice president of a a company here and i didn't i had my whole life planned out i didn't want to quit my job but i knew in my heart i was i was being really called to do this and i i got where i couldn't sleep and i got up one night out of bed and i said okay god i'm going to the deep end of the pool and i'm going to jump and if you don't catch me i'll drown because i can't swim yeah and uh where i say that in the book the last sentence in italics is he caught me because i learned how to trade yeah um and so i was making money i started trading my ira where did this weird thing called options come in what was your first exposure i i went to a a program at the coliseum that had a lot of different speakers but uh they had a speaker from uh invest tools i got you there were that was the only speaker that said anything about the stock market there there were um a lot of different speakers and my friend and i were sitting there listening to that and he offered to uh anybody that signed up that day um would go through a free seminar okay so we signed up for it um and at that seminar uh they were selling a program for uh twenty thousand dollars now this is all uh this is way back okay and my friend punched me and she said let's sign up for this and i looked at her and i said are you crazy yeah um she talked me into signing up for it so that was the beginning of uh that was a two that was that two-year program and then i heard about you and started going to all your seminars [Music] and i just learned and learned and learned but i started out trading uh in stocks i got you and that's when uh apple and elon pharmaceuticals uh took a lot of money away from me so i i just said i gotta stop trading stocks and i i just went into options i i took a lot of options courses uh that invest tools course had uh four sessions and two of those sessions were on trading options so i learned a lot about trading options through that program okay and it just kept pulling me in and pulling me in and i'm so thankful for that because um i don't have to uh you know being a cpa i would um like an apple i studied their financial reports i i studied their annual report balance sheet income statement and i thought i had a wonderful investment and then steve jobs announced one day he had cancer i had no control over that that's right so i wanted to let that go and just get into options where i didn't have to study stocks and pick stocks and then something uh outside the company happened to it and the stock just fall like apple did good point well it wasn't uh i never looked at it as money i still don't look at it as money i look at it as positions uh you've got to know what you're doing and you've got to do the right thing but i've never looked at it as money i didn't the 200 million dollar account didn't mean anything to me i was just trying to uh trade it wisely and i only i reported to the chicago board the nftc audited me and they didn't find a thing that uh my trading was uh all up and up all up and up um i wasn't trading under the sec i didn't trade any uh stocks okay so um the uh sec um there was a memo put out by the woman this was under the obama uh presidential period um the the woman i don't remember her name i have let all that go out of my mind um she put out a memo uh encouraging the companies to go after smaller companies because she said all the big companies had internal uh internal lawyers and that they fought them more aggressively they fought the sec more aggressively she said go after smaller companies and about two weeks later they showed up at my uh office i had to uh explain what a put and a call were to those folks and um uh they um they saw in my heart and in my mind they saw the money um they uh well i won't go down that road but um they uh my life is not about money my life is about serving god so uh he repaired my heart from what they did to my heart um so and this book um wouldn't have been written i i uh moved to cyprus for two years i was doing a ministry on the isle of cypress and i got this phone call from this man i didn't know one night and he said uh you don't know who i am but i've heard part of your story i think a book needs to be written about you so had the sec not done what they did to me uh this book would never have been written uh well i'll tell you just you know i can tell you from a personal um i talked to karen a decent amount of times an email as you were going through the trial that you you did and i could say it was you know it was a big encouragement to me that her eyes were focused on god and not herself which is good because you as you're going through you know i would look at it and say boy i couldn't handle that you know that's that's what she's going through but you know you were an encouragement and um with the book so you were talking a little bit about the gentleman who approached you he called me one night and i said i'm coming home in um this was january 2019 that he called um i was coming home the end of february 2019 to sell my house uh and move into an apartment which i've done and i met with him i told him i would meet with him [Music] and he just loved the story about my life and he hired [Music] i i am considered the author of this book but they hired a writer that i would be the author because i told him my story sure and he wrote it down so um care tell a little bit about the you know one of your main purposes correct me if i'm wrong with trading was as you say your heart was never after the dollar bill you were good at trading but it was really about your ministry in africa and and that's really but why don't you tell a little bit about that and even during the period you were trading most of your profits were going towards this ministry anyways right it was uh when i got that calling in 2007 um i quit my job and opened up just hope international in march of 2007 then when i started trading for a few people in 2008 i opened up just hope foundation and i was putting all the profits that i was making from trading for them into just hope foundation and that foundation is still functioning today and it's paying all the administrative cost when i started just hope international i had worked for a few non-profits and don't take me wrong uh non-profits have to pay administrative costs but i was working i volunteered for a couple of non-profits when i looked at their books uh if you gave them a dollar 97 cents of it went to their administrative cost and three cents of it went to the purpose that they were wow i said i'd never do that i've never spent a penny of any contributions uh on administrative costs so um i just swore i would never ever ever uh pay any that anybody that gave me a dollar the whole dollar went to help somebody else in some other country and and i know i'm called international work but i volunteer for some things here locally too but i've traveled all over the world i've worked in south america i've worked in russia i've worked in india i've worked in europe and i've worked all over africa and it i look back on my life and think had i not said yes that night and gone to the deep end of the pool and jumped what all i would have missed in my life it's been remarkable so i'm so grateful that i said yes to god's calling and um it's been uh an amazing an amazing last um uh what 15 years yeah care give us i know you've told me a little bit which i think is fascinating the type give an example of the type of work that you do with the folk in africa because a lot of it you're trying to you always think about okay helping whether it be the poor in our country or the poor in another country you think okay is it best to give money or is it best to teach them something so that then they can kind of make and i think you really kind of hit that on the nail maybe give an example kind of how you approach things uh my um comment is that i give a hand up i don't give a handout because giving handouts to people make them dependent on you and this country is um full of giving people handouts now and i won't go into that but um teaching um like some places in africa when i i went to malawi and i went to sierra leone for the first time and i saw how they were planting i went into small villages i didn't stay in big cities i went out into small villages and i uh saw what they were doing they planted corn in the same place for 10 years and that corn wasn't growing as well as it could uh they burned they set uh fire to all their fields and they burned everything um that's the way they clear their fields um i i had a ag specialist and i would take him to these places and he would talk to them and they were so grateful and he would work with them and show them uh what had to be done and they increased their uh output double triple uh they were able to sell some of it not only feed their own families but sell it they were able to start making enough money to send their children to school all those things just filled my heart and that was my purpose uh my purpose we've we've taught people things we've i worked with a lady in peru that wanted to start cooking for people and um she bought she rented a little store where they had one table and uh won two chairs in it and i worked with her and i taught her how to do it and keep how to keep up with her cost and how to um uh what she had when when i would ask questions of people how much does this cost to make this uh they didn't know they would just say they would just look at how much it cost to buy this they didn't know they were adding adding this to it and adding that to it and so they had to they didn't know how to figure out what it was costing so i worked with her and i went back to peru about two years later and she had a complete restaurant and she was just uh so happy to see me and um and in the in the book it it also talks about an area in peru where the shining path um would go into villages and either the men would join the shining path it was a militant group um he would get killed wow okay shining path uh i went into a village i was told i was the first american to go into that village and it was torn down all the people ran and hid in the woods and the peruvian government didn't didn't help them for several years i was there that day and all the villagers came back and i brought them i i brought them guinea pigs chickens uh seed and fertilizer and they restored their whole village wow now that's i appreciate you taking time carriers amazing uh uh just just to talk to you and i'm glad you're you're back trading and just show my book yeah yeah the list is my life story and it starts out um i didn't know how poor i was when i was growing up uh my father uh spent four years in world war ii overseas he was in europe and northern africa i learned um i learned just about two years ago that my father was a world war ii hero and the epilogue because he never would answer any questions uh that my brother or i asked him about [Music] what he did in the war and i found information on him and it was verified in washington that he did what he did so that's the epilogue in this book um so uh i tell my whole life story we were i didn't know how poor we were growing up because um my mother and my father were so good to us um and i would uh tell the story about uh i would say daddy it's windy outside can we fly kite and he would say uh go go in the rag bag and get me some rags and go out and get two sticks out of a tree and um bring me the newspaper and i'll make you a kite and i didn't know that we couldn't afford to buy a kite so i lived uh without anything and he came home one day with an old canvas tent and everywhere we went we slept on the ground so um i'm thankful for that because when i sleep on the ground in a mud hut in africa somewhere i'm okay with that yeah because i was brought up sleeping on the ground god prepared you for your yes he did yeah in the so this will come out november the 9th well thank you karen yeah it's been a joy having you today and uh looking forward to the book coming out and just good to see you next time i want to see you in person but this is okay this is as close as we can get in the current environment that we're in but yes so much and we appreciate it karen okay it's good to good to see you good to talk with you good to share all this stuff with you and uh i'll come see you one day right we'll we'll do lunch all right okay thank you karen thank you everybody appreciate it thank you bye you

Channel: sheridanmentoring

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Keywords: Income Trading, teach me to trade, Options for income, trading short strangles, Dan Sheridan, Dan Sheridan Options, Sheridan Options Mentoring, SPX Trading System, Trading Systems, Stock options, Risk management, Options 101, adjustment plan, adjusting your trades, Karen Bruton talks life and trading with Dan Sheridan, Karen the Super Trader, Trading Naked, Karen Bruton, Karen Bruton trading in 2021, Dan Sheridan and Karne Bruton, Trading Condors, SEC, Karen Bruton 2021

Id: Tgd3HQbcJzI

Length: 50min 46sec (3046 seconds)

Published: Sat Jun 05 2021