Electrical Engineer and Options Trader Loves Selling Puts

[Music] how's my friend WABAC rising star beautiful David how are you man hey good hey welcome to welcome to Chicago I don't how often you get to Chicago first time first time yep oh cool okay well sorry running couple minutes late we always try to get everything done early and then we're running cuz Tony can't shut up it's amazing but thanks so much for coming out I know you got here late last night and we're excited to have you yeah no I'm excited to be here appreciate the opportunity that's great can we get a little car done I'm David beautiful so we'll give that we'll give our viewers a little background grow up and live in Northern Virginia right master's degree in electrical engineering from Princeton undergrad you went to UVA that's right because UVA has usually has a better basketball team than Princeton you know Princeton is not bad for you know I believe started watching tastytrade in July of 2017 so that's that's like two years yeah a little over two years little over two years trades only short puts and we're not gonna say only but Maryland yeah primarily and I know I say ever exclusively but SPX Rutte IWM and hobbies include rock climbing and collecting museum collecting custom playing cards and playing cards yeah it's just like playing cards you play poker with but some artists they kind of customize that boxes the faces and the art it's sort of like artwork and it's just something that I had a hospice this is cool this is an example one them but everything's different it's kind of just like artwork pretty much and a lot of different stuff is it's neat to nice so there's there's so many things that jump out at me I'm just gonna go all over the place with you sure the your background from what I understand from reading your bio was that you started kind of getting interested in markets do you mind saying rage 34 34 okay good so you started getting involved after you graduated after you got your masters it was in Princeton that I got in prison yes and and in that time it's about 2008-2009 right right right around that time so you got in kind of after the meltdown yes fortunately right actually I I was following the markets during the meltdown but I wasn't trading heavily yet so I had some small positions but your student yeah and but I remember like the thousand point down yeah on the Dow and and thousand point of I mean I remember all of that miss Mo's capacitor so so you're you're a student you're electrical engineering student yes and you're obviously in the master's program the engineering full-time student yes at that time okay so there there's it's a crazy amount of tasty traders are engineers like a ridiculous I can't even like it would be it blow your mind if we got into that but it's a crazy percentage and and I know it's math related and everything else but at the time in 2008-2009 you'd never heard of us and we hadn't even started today until 2011 anyway so you start out in the business and you and you start out you know trading and looking stuff where there are a lot of other kids that were your age or that were in school with you that were doing something similar no there was only one and it was one of my buddies there he's the one that got me into option trading because I told him I was trying to trade like oh I'm buying some stocks and I'll try and get into it he said habitable options and then he told me about basically put selling you know the idea of premium and then rolling so that's where I kind of got the early start and it was really appealing at the time oh you know I can put a position on I collect this credit and then market moves against me okay roll it and you know obviously we're at the bottom so it was easier right and and you're just rolling rolling rolling it's just like printing money so I mean that's how I got started yeah that's so funny and then it's great that's great cuz that's great why did anybody else like why were it just the two of you guys I'm mess of people didn't like mine I don't know because she I don't know how he got started but when he got me into it I was just so focused on doing myself and I would talk to people where I mentioned your friends are ultimately when I started working you know my co-workers and they knew what I was doing but I guess maybe it was too complicated or something and or maybe just didn't have the interest there or too abstract so in the field of electrical engineering what do you actually do I don't really talk about my career that's that's kind of a private so okay that's fine yeah I'm just curious I because I don't really you know I don't know a lot about it but that's fine but you are in that space yes yes I am okay so throughout time you're you're you're going along you're trading your you know using a-put selling strategy you're trading some stocks whatever it is right goes over you know almost almost eight year period right and in all of a sudden in 2017 you know a light bulb goes on how'd you find tasty trade so somewhere in between about two three years before that I actually pulled out the markets because I took some money to go buy a house and I just never got back in yet sure not a friend who was he had his money with I don't know which Furman was but they were kind of managing his money and he wasn't happy with the returns and he knew I was trading options but he never really got into it and he started looking around and somehow found tastytrade but the funny thing was he didn't really have the in-depth knowledge like he saw your content and you know like people who find you first like it's like a fire hose right you see all these segments and right and he didn't really understand it but he knew there was something there and he knew I was involved so he started emailing me and pay me like my head like hey David look at this look at this and at the time I was not really that participating that much and and I was like I blew him off for a bit but finally he was like look can you watch this segment and I remember it was a calling Talman Tony and somebody was talking about like you know hey what if I hold my positions to expiration and squeeze at that last bit of juice and of course you're like you know it's not worth because it at risk and we do 21 dte and it was intriguing and and I knew enough to get the terms but not know why so that kind of sparked it and I mean that's always they say and once you find that you don't go back you know once your bid by the book yeah that was real acted on seventeen that that's one July of 2017 so you started out and and then you were kind of like a junkie for a while I mean this are all looking up the information all in yes all in yeah did your wife think you're crazy at the time or no um probably a little bit a little bit because at the time like watching too many shows on the Internet not just to me shows but you know what trace more trade often like you can really get into it like really small really often and adjusting Delta's out sure and you know that you can you can are easy and it's funny things like I don't know if I called in or something but you got talked about back when you're on the floor or something like you were you guys would flatten out like every afternoon that was your job to flatten out and it did the same thing I would do much trades and I would try to flatten out or get to some number and you know 4:00 p.m. 3:30 and it was crazy and like I definitely over jested because I was adjusting my I was trying to neutralize like every hour you know market moves challenge right right right I had an email this morning from somebody he said well because the rates because the Commission's have dropped so low on stock now you know there's zero so he's like can I just use because he had a pretty large counties like can I just use stock now dr. Han just and Delta H because the reason you couldn't do it before was because markets were too you know the commissions were too high and now that there's no commissions I mean can't you do that I'm like well you can do a lot better today yeah I mean right yeah with zero to adjust I mean yeah I still don't think it's probably the most prudent way to trade but you can do it floor or so today so so take us through your before we get to 2019 because I want to focus on 2019 but from the summer of 2017 when you first started watching us to kind of you know sucking up all the content that we have and watching everything and you were emailing back and forth with Ray in your you might have called into the show and every day oh yeah many times okay so take us through that the next year and a half of light from the end of from the middle of 2017 to the beginning of 2019 like doing some of the ups and downs and give me some of the you what what worked and what didn't work okay so 2017 when I first started and the whole idea of no delta-neutral carry short deltas I mean I I was trying to top all of that mostly like strangles or iron condors but 2017 obvious was very challenging to the upside so I was not really making a lot of money and it was getting frustrating as a growing field Ryan yeah and I actually sort of capitulated and just started going long delta for the most part around november I just kind of I was like alright let me just just follow the mark you know people say trade the trend or whatever and start it of course making money because it was still going up through early 2018 January still going up pick that 2018 yeah big not huge but because I wasn't trading huge like leverage wise at the time so I had to draw down but I was able to kind of roll those positions because we went down 10% VIX hit 50 and then we bounced and yeah you talked about early 2018 the meltdown from the middle of from the end of January to the middle of February yes yes February 5th or eighth week and VIX hit 50 that one Monday and I made it through that goes a big drawdown but it bounced back so but I sort of changed my tune a bit I was like okay let me do a little lower Delta maybe don't leverage as much because that was like I got like what were you training what kind of products then everything everything liquid you know Apple Facebook everything on you know you had a tasty trade there's the tastytrade ah we watch lists of the most liquid ones or the tastytrade products and yeah it's like spotting opportunities hi I've ER put on a trade put on a trade you know everything guys teach basically yeah so you were just you were just you were all in and figuring aloud I was freaking all out definitely at what point did you realize okay I I get this and like I own responsibility for my successes and my failures so I stopped trading so many products because I was getting too much to manage because I wanted to not have to watch the screen rifle the whole time yes yeah so I simplify my strategies I went to primarily short puts but I also started carefully logging my trades and the main thing about that was when you log your trades you can really go back in and see what works and what doesn't and you know I'll put on the same strategy high probability trade but obviously they don't all when they don't all lose but then being able to have you know 50 occurrences 100 currencies and looking at the win rate and seeing the math work out I calculated average winner max when max loss and seen the expectancy once I could get all that and really internalize and just trust the numbers because no you guys teach the probabilities right but until you do it you can't internalize that you're just kind of listening someone else right I'm sure but once you okay and you know the math works then you can just follow the strategy and if your strongest do you think you're strong one of your strong suits and all this was just I mean obviously for I think from what you told me math is math is not a witness clearly not a weakness right right so so the math totally made sense yes yes and so at some point when the math makes sense my argument is that I like to use the argument I shouldn't say my argument I like to use the argument that your decision-making capabilities you know quickly move up quickly kind of as as far as your ability to process what is what you're doing right and what you're doing right and you're able to make those adjustments and you're also able to assume responsibility for you know the outcomes right okay and then that happened through 2018 you think it was during 2018 yeah that year like as I got a little simple when I simplify the strategies I was able to track them better because when I have all these positions I'm rolling and one wins one day you don't run over though by to some late November December in 2018 yeah it was tough it was tough yeah it was tough but it also learned a lot because you know you kind of know your emotions like what you'll feel because you didn't tell you know making money is easy but it's how you handle using that you learn not only about yourself but about how to try you know so if your strategy was mostly like short puts and things like that was it that way in December of last year a year ago yes the down move started about a year ago right now yeah it turns around start around Thanksgiving 2018 right and that was a violent down millas violent right into like right after Christmas right yeah and so so but but you you came out of it okay yes you learned a lot I learned a lot what you like I learned that you really have to manage risk even more closely because I wasn't using stops at all or like in terms of like not managing like our just mental adjustments memento adjustments yeah it wasn't as rigorous before and I learned about just like really even going small or like we could you can never get like you I said you can't get hurt by you're going smaller yeah no so just really minding the risk and learning to like take it in stride and make that adjustment so before we get to 2019 by the end of 2018 the end of last year do you think that once you had learned trading had changed the way you do business in your in your and your livelihood your electrical engineering you know background and and your work stuff outside of it's your full-time job did it change the way you performed other tests were you better at everything else because of the way you had to defend and adjust trading and all that kind of stuff I'm just curious what impact you've had on other parts of your life the answer is yes but that sort of aspect that you know that's been going on the whole time just because you always say like trading is about trading as you guys teachers like about how big decisions and the concept of pots and always looking at the upside and the downside if you can figure out that you know if you can quantify the risk you know how much I can make or how much I can lose it makes that decision a lot easier yeah you know so in that translates to everything in life is I was a trading is life life is trading right everything's patas is always risk/reward always a trade-off always a decision to make so no dude started when you were like 12 of course yeah of course so let's talk about the reason you're on as a rising star so as you built up equity and everything else in 2019 year-to-date you've been working full-time and trading yeah and it's you know it's it definitely has not it has not been a really good two sided year you know it's been pretty much a grind to the upside contracting volatility no there hasn't been any ball til he pops in all 2019 have you done for 2019 as of the close yesterday just under 20% just under 20% right that's great I mean you've only been doing this a couple of years you know at this pace right do you feel like now like what you're able to accomplish now do you feel like that is something that you can and that's on that's on a fairly significant amount of money I mean I don't mind me saying it's on you know way over a quarter million dollars yes okay and because I don't want to give out everything and you've been able to do that do you think you've reached the point where now like you can you can create some kind of scalability with that and and and also repeatability to say that's absolutely the way I trade now is all about scalability and repeatability because no I have maybe two or three kind of bread-and-butter strategies but each of them is based on a trade you know like a short put and I'm one of them and do I do a 5 Delta short put right now I have to use a stop but then you know if I get stopped re-establish which is basically like rolling in a sense but you know I've studied the numbers I've done back tests I've made my own back tests but after the back testing I've live traded it but again once you go through and you see the trade log and you see that win rate you know over time start to converge on what the theory should be that's the most satisfying part cause you know like they're trusting the numbers especially that's the numbers guy like you yes I just had this discussion this morning answer I know you were talking to those guys out there but I just had this discussion show I just did a show in LA on futures on futures and futures options and I all year I did not look at my futures options positions but I just put together a piece for my la show and I showed my results and they came out almost we kept almost exactly 25 percent of the premium that we salt in for all these futures options like right 10 or 15 different underlines over the course of 2019 trading small just keeping it all delta-neutral not doing any other than just letting it you know run its course and where the numbers played out with it on the number right call us on the number and you're right it feels freakin great when that happy cuz you're like okay well this thing you know it dude was supposed to do right and then one thing that's interesting before I really committed to what I'm doing I back tested it so I had as trade I built a back test of this in a put strategy on SPX I had about 400 occurrences and I customized it where I can change the Delta 5 10 20 30 and all the numbers are change and my friend was like hey let's look at the wind rate because I said it where you can have no stop or 1x 2x - it's kind of like you guys did you sure boat let's take out the stop-loss and look at the win rate and you know 5 Delta guess what 97 98 % no 10 Delta 95% I mean and it wasn't like I made the best tutor in the supertrain approach and I wasn't trying to make the backtest to meet those numbers no I know it just happened and it was almost scary like like wow like I just you know everything you know you take these trades and you take the back test and it it does follow the math so that's when you can really like internalize I think if there's another situation like what we saw in December or January or February of 2018 or December of 2018 or going back you know like let's just call it like a situation like mm I don't think I'm gonna see another 2008-2009 but you don't easily see we've been in the midst of a ten-year bull mark you see a pullback you know you could easily see a nasty pullback here of let's say 5 or 10% do you think you're you're gonna be ok in that move yes because I do care short oh no I'm gonna have a hedge position okay good which is a true I mean I beat higher by some percent if I didn't have this you know pages you're drag yes I definitely have a hedge a scrum that's at least another four or five percent of drag but you know what it's part of the game right and and I got I want to be ready and and I almost think of it like that four or five percent obviously if I do that for ten years that's 50 percent no it compounds that but if the crash happens and the pays off that may all pay back you know and it's just taking the profit and just shifting it and it's peace of mind peace of mind exactly yeah so so that's actually you're asking what I've learned from last year like yeah I had something like that but it wasn't quite enough now I'm really like that's that's actually where I spend most of the time just kind of mining mining that down you realize you are far more sophisticated in the world of trading than 99.9% of all hedge fund managers you do you know that I mean you're just a traitor Amy does it feel it must feel good it does and but that's the same message you've been trying to learn this but I mean like you know if people follow you guys and really take this in like no this is complex stuff but then you know once you really learn it doesn't mean you're a junkie yeah yeah no of course yeah I I hate the trading holidays you know agree do you ever see yourself not doing this for now no no for now I like it I love it yeah it's a I you know I get withdrawal on online kids say hey Dad what's with the ding no not really yeah okay yeah got it got it got it well Tom like hey it was a green day is a red day so he knows every day is a green there or red does the extent of it's okay that's not bad that's all right but they can start quoting futures that that's that's awesome yeah um David thank you I mean I know 20 minutes goes by so quick here and I know it's it's so difficult you know to come out here and and to disrupt your weave but it is so awesome that you came out you told your story there are a hundred thousand tasty traders that and I know you have like a little community of tasty traders also that you talk to in things like yeah this proactive Facebook yeah online great yeah and thank you so much for coming out here and you know kicking the tires and checking out the studio yeah breaking bed with breaking bread with everybody here and your stories it's it's just awesome and I think you know in a couple years you're gonna be you know you're a rising star now but hopefully you know you're a shooting star whatever it is whatever the next level hopefully yeah it's awesome thanks so much yeah thank you guys appreciate time we take a quick 92nd break we're gonna come back David you sit with me if you want to we're gonna bring in the real town the tastytrade mr. Christie Ross next is it a straight line you

Channel: tastytrade

Views: 64,516

Rating: 4.8914027 out of 5

Keywords: Investing, Investing for Beginners, Finance, Stocks, trading, options trading, Option, personal finance, how to trade, options trading strategies, Market, tastytrade, tastytrade network, tom sosnoff, tony battista, Market Measures, trade research, interview, inspiration, short puts, IWM, SPX, RUT, engineer, electrical engineering

Id: EG3kKNZxkBQ

Length: 22min 40sec (1360 seconds)

Published: Fri Nov 22 2019