OPTION TRADER makes $105MM PROFIT in the NDX, SPX & RUT - Her STORY Uncovered

I'm gonna set the stage for the discussions we're gonna have for the next 45 minutes we start with going to a class in 2002 we ramped it up to a hundred thousand dollars of her own capital which she turns into one hundred and fifty and then she raises not not intentionally raising but somebody else said hey you know what once you manage my money along with yours is originally how it started so you end up with seven hundred and fifty eight hundred thousand dollars some number like that which is a significant amount of capture but the amazing part of the story this is just the beginning so we're in 2008 now you remember what happened in the end of 2008 we went through a meltdown and from from the beginning of 2009 okay and and these are just some crazy statistics you started to you started to create you started to get some you started have some amazing results and people were essentially just kind of throwing money at you it seems like I mean I know I don't wanna sound that crude but it was it was it was almost like wow something special is going on here and we want to be involved more like it so over the next couple of years and I don't want to get into all the specifics you essentially built up two funds one fund that started in 2008 that raised in total okay forty two million dollars and you turned that 42 million dollars over time with all the different you know with all the different returns and everything else into a total of 95 million now people can say hey that's that's just a mediocre return I promise you I've been around for a long time this is not a linear business okay it is not linear and what that means Karen is like somebody can turn $10,000 into $20,000 or $40,000 it's fifty thousand to a hundred I I've been in thirty years just buried in this business and not too many people have turned forty two million dollars into ninety five million but that's just fund a fund B over time okay you started a second fund with 1.3 million and you ramped that second fund up in total okay two if I just want to make sure I have the the numbers all correct but you ramp that fund up to about 20 there was a total of about twenty seven million initially invested in the second fund of which you turn to forty two million and then on the forty two million you ramp that up you collected you raise a few more dollars another twenty five million or so and you turn that into ninety five million to a total of ninety five million so so you went from this crazy idea that okay I can trade with a hundred thousand dollars I mean and listen your your your your and we call common folk your I'm calming about you're calming about and I thought so hundred thousand dollars and and in the end you're managing a hundred and hundred and ninety million that's correct of which a hundred and five million almost I'm just I'm ballparking of which a hundred and five million dollars are trading profits and here who you are and I've been around SPX at sp500 traders my entire career and I can promise you if I told if I got a room full of 300 SPX traders and grabbed him out of the pit and said you know there's a retail customer out there trading on the thinkorswim platform that's made a hundred and five million dollars in your pit and you don't even have any idea that she even exists they'd be like you're out of your mind I Tony out of you son no they would say they would they would bet I didn't believe you they would bet both pinkies on that one hmm okay so this so it's a phenomenal I know you're gonna downplay it but it's a phenomenal story and I think the driver behind it is the simplicity talk to us about how simple you keep your methodology and how simple your approaches I first wanted to say the reason for the second fund was the profits from that fund the net profits from that fund I'll go into the charity so it's created a very unique way of raising money so you're a better person units to combine tried to raise money is a tough job to be in so this has been a blessing all the way around so um what was the question it was it's about simplicity simplicity because Karen is easy looks in this room is isn't it is it Karen I think I Tony I both felt since we started the show that the if we cut out all the noise and and and a lot of kind of the ideas that this is so complex and talk to us about this about the simplicity of how you how you created your business and how you make money with just a very simple approach or yeah we have we have moved from 2008 to 2012 from a very complex environment to a simple environment and I said in last may show the simpler we've made it the better our return has been it it takes the noise out of it it it you can effectively trade on watching very few technical analysis watching very few charts simplifying just the the range that you trade in and we have two funds sitting there if we tried to make this very complex we could get into trouble very quickly so by keeping it simple everybody in the room knows the game everybody knows what we're doing there are no questions we know where we want to trade we know how much we want to trade we know when to stop trading so one of the powerful one of our powerful strategies is to keep this all simple and to keep it narrowed basically and a few indexes okay so let's talk about that so you told me earlier today you told Tony and myself that a light bulb went off kind of late 2009 gosh okay going into 2010 and prior to that you had traded mostly iron condors I credit spreads and starting which you did amazing doing that but starting in 2009 late 2009 2010 you started to get more into what we would call some naked positions and some naked strangles things like that can you talk to us about first we'll start off with the products that you trade up to today the products that you trade today from the products I traded originally we traded I mean there were times we had 30 stocks as far as options we've always been in options and we were trading and iron condors but we would leg into them but basically we followed about 30 stocks and then we started whittling that down to about ten found that was so much easier to do but so much simpler and then little by little we got burned a couple of times on earnings and I know you have some special strategies for earnings but trading the way we traded we got burned a couple of times with some earnings months and then we started saying well we won't trade those options on those stocks in those earnings months we'll just stay away from that little by little well let's go into indexes let's look at the index it takes us out of the earnings season it takes us out of a lot of the volatility it smoothes it out a little more and gradually we just move it into the SPX index and the Russell so now hey Linda let's throw up something just some slides just so people can see some of the stuff that we're talking about first the SPX and we just put some slides together so you can see so the SPX is the S&P 500 and we'll leave that up for a second then we'll put up the nd X and then we'll put up the ru T so you can see now would you say today that most of your trading today is in the SPX yes and the reason that you use the SPX is because you've actually got a little too big to trade the Spyders if you had a smaller account you'd probably trade the Spyders probably if I was trading my personal account I'd probably be in sp y IW m QQ QQ maybe with a normal person with like 600 grand around that kind of thing right a smaller account I've been there yes but with SPX you get it's very liquid we can trade the way we want to trade we get the premium we want to we get a good premium and there's a tax advantage to the SPX 1256 contracts so 60% for right now 60% is tax long term Kapoor gang right 60/40 28% max oh yeah so so there is so so now we're focused on kind of one product but but let's take it a couple steps further okay we believe that there is there is a lot of logic in the number of occurrences when you started to ramp up your trading were you also able to ramp up as we call it the number of occurrences meaning do you even to this day do you remain relatively active we remain we're very active okay explain what variants as far as our trading goes we are putting contracts on mainly in the next month and we're closing them down for profit and putting those back on where theta traders theta it means everything to us using that time decay in options and when that time when it gets and when our positions get into the current month we pretty much leave them alone and let them expire and we're already out in the next month working so depending on volatility if the volatility is higher we flip these we call them just churning just selling and buying back selling and buying back as long as we can pull as much time value out of it as possible and then when that dries up we usually just let them expire worthless there is a term it's called Lateran which means that you would do like for example right now on November's 30 days December is you know 55 or 60 days that kind of thing and then January is whatever 90 days that we call that laddering out positions do you have a certain time frame that you look for when you're making trades like I like if you were to look at a blank screen you can choose the perfect number of days to expiration for your methodology how many days would that be it it's 56 it's just a number we use because it's eight weeks we look at getting the maximum time value but we want that start decaying and you know I think theta starts decaying around 45 days so we're trying to get as much time value but we don't like to get way out in the future December is getting close and we'll be trading December 1st of next week probably let's that I don't see this I don't want to do really yeah I don't want to get in January they are just not not knowing what the markets going to do I don't want to be stretched after you find yourself with the volatility low volatile environment we have now you're going out a little bit further than you're comfortable with or I mean not really we're pretty much sticking to it it's brought our returns lower we're still having a decent year but it is lower because around we're doing good right hey we haven't had a losing month yet so I'm ok with it it is 56 days is a is is actually a little bit longer than our wheelhouse but it's at them outside end of our wheelhouse but what's fascinating about that is that that the longer you go out actually the more you kind of define your risk so I assume that's one of the reasons it's a little less risky when you go out a little bit further because you can get a little wiring it wider right we love we love that so when you look at positions because I think what everybody wants to hear are the specifics ok so so the first specific that popped out was that 55 56 days because the industry has a tendency now to go towards a shorter timeframe like do use weekly options we have we've been kind of testing the waters this year I'm I can't say I'm a big fan of the weekly sure probably will trim that down but with the low volatility we've been able to make some profit in the weeklies still our bread and butter is going out 256 days now we've had I think most people would it would be fair to say that if you were managing a $100,000 and I said you're up 30% this year and we're just heading into the fourth quarter right now you would say okay Tony that is that's an amazing return you did a great job but just to put Karen in perspective here she's managing right now about seven about 95 million total and this year she's up 30% net going into the fourth quarter so and that's after fees and everything else 30% I just want to put this I want to put this discussion into perspective because the numbers are this what's up year volatilities you know we're hovering around you know fourteen fifteen percent so so let's take the next so we're talking with got 255 days now let's talk a little bit about some of the strategies like like if you were to employ as you said early next week maybe a December position let's talk about some of the things that you that you may do well we we we trick ourselves we pretend like the market has fallen so under the the the oath saying that the market only crashes down the market doesn't crash out so we feel like we have to protect ourselves the most on the downside we've had some difficult times this year with either with the move up up on the upside but we say the market is lower than what it really is and then we go 12 12 percent below that we use the analyze tab on thinkorswim and where the the current number is we pretend like that numbers already dropped right now we're looking at around thirteen seventy we're saying the markets at thirteen seventy so you're at 1450 the real market and you kind of make up this fictional 1370 we pretend okay it really at thirteen seventy and then we drop it down 12% below that and then you take it down twelve percent below the thirteen seventy which generally takes you to a probability of being in the money of about what a probability of being in the money of about five percent okay so Tony we've been doing a lot of experiments with that probability of being in the money carrying you to love the stuff we've been pumping out research-wise but the probability of being in the money of around five percent Tony can you show what that kind of what that means mm-hmm got it here so you're looking basically at the twelve twenty puts in December is where I am right now okay and that would be and trying to just hold your cursor to the probability being in the money at five percent and Karen I I hate I hate to keep going back this but I wanted to everybody to understand that's all you have I mean that's all you look at uh yes but okay with the amount of money that we're talking about we will trade very actively around 12:20 maybe 1225 1215 and we'll turn that 2 or 3 times and will you also let now when you say you'll trade that that means you're opening trade is to sell those that's so right now what about the upside when you sell those puts will you also sell a corresponding call because it requires no additional capital no we leg into each side we will sell calls but we sell them today would be a terrific day to be selling calls ok why the market was up not having everything in front of me today I have I understand why I get it I just want to get across it you sell on an upswing and and control help puts on a downswing because again we can get further out we're trying to wide widen that as much as we can we watch we have Bollinger Bands on our SPX chart at two standard deviations we want to be out from that the upside is a much greater challenge than the downside if I'm trading down at that level I'm not worried about it really not worried about it if the market Falls that hard we're in trouble for a lot more reasons than just this then you're up sighs objection so the upside we it's it's tough we're probably a little closer in and looking more around the 10% on the upside so let's take a look at what that means on the upside Tony and then Linda after Tony's done with this if you could throw up what a strangle is on the board that'd be great so you look at approximately the 1540s or the 1545 we would look at that and then we look at our charts we'd see where we thought a strong resistance level was we would make sure we get above that resistance level so all that comes into play and we're looking at the upside and would you sell it equal number of upside and downside or is not necessarily not we it we're a little softer on the upside will will sell more on the on the put side we can make more money okay and be safer be out further so let's talk a little bit about um its what you just refer what you just talked about there is your target and I think this is the most interesting thing about what you do is compared to what a lot a lot of how we trade number one you're a little uneven when it comes to the amount of cells that you have on both sides of the market and your focus seems to be more on premium collected rather than on rather than on the mechanics of being equal equal on both sides of the market it it is driven by the analyze tab and where we are where we are 10 percent up from the current position where we are 12 percent down we watch that that is compared to our net lick and we just don't want to be pushing up close to that net lick so that drives us much more than number of contracts or whether our positions are even or not so it's more of a buy we've said this for many years it's much it's much more of your managing your buying power reduction as it relates to your net lick yeah more than your managing some kind of mechanics around a specific standard deviation move yeah yes that yes I would say that no okay you I'm getting the emails because you've said it a few times we now our conspiracy theorists that are in the audience are thinking that maybe you're that Keyser Sosa type of person where you know you're that they the day that we've been looking for the we the day please those who we as the team of 6600 is a team of six six five traders and one number cruncher God and that number cruncher goes over all of the volatility in all of the market the traders do that the number cruncher tells me how much money I made every day that's gonna make it clear so let's get back to this let's get back to this discussion because so I'm trying to get lots of different takeaways for our forum members and the next takeaway is so people have a big issue so here's the amazing thing about what you've done is you you did the the what everybody thought was the impossible which is scaling a logic that everybody gets the logic here but scaling it so so you're and again I want to go back this you're you're you're in your mid 50s and you're basically rolling the dice big time because at some point okay you're not holding back how much capital are you committing at this point in your life like we're talking 2009 2010 2011 how much capital are you committing of the total capital when you trade like I like I might commit 20 percent or 15 percent or 20 maybe 20 or 25 percent I don't know what it is but you're up there it we're we've got a suggestive target of 50 percent capital committed okay and and that'll range we'll commit up to 70 percent it depends on the situation 70 to 80 percent and then we'll try to pull it back in any given time we we may be stretched a little further out than we want to be I love 50 percent I love having a bank sitting there that if the market moves on me and I need to move some positions I've got the capital to do it so I don't have to sit there and I don't put stop losses on I never used a stop loss never use a stop hate stop losses okay I want to manage my account I don't want anything automatically happening to my account we've got five people sitting there watching this all day we don't need to put stop losses I love the fact that you just said that but but but moving continuing to move in in in the same direction so you commit a significant amount of capital obviously if everything's going good all right no harm no foul but let's talk about all of a sudden now something happens it's either it could be and vent it could be a one time binary vent could be it could be should be something hat who cares what it is it could be the flash crash of 2010 a doesn't make any difference you have these very large positions on although they're liquid products there are you know they don't always make people comfortable we like to define risk through size meaning keep our size small to find your risk you are much more of an all-in traitor and you're not all them but you're you're more in than everybody the most people otherwise you can get to these numbers is what do you do when and what's the stop what's the mental stop point first what's the mental stop point and then what do you do when the trades go against you I'm more all-in but at a much further out range and that's how I justify that in my mind our first goal is to not lose anybody's money and that's very important to me so staying out 5% sometimes we're 1% of probability of being in the money huh it's what do I do how's the best way to just well let's put it this way the master the first question is the first question is at where is that mental stop is it if you're if you're 5 percent out of the money is the first spot that you could concern about a 10 percent or is it a 30 percent on that yes if a position moves up to 30 percent then we're we're just keying in on it saying what are we looking at what's the problem here what's happening to the market could this position get into trouble quickly if we're not comfortable leaving it where it is we start what we call tweaking it we will move pieces of it we'll roll part of it up if let's say it's a call sure hard evidence being tested to the upside we're being tested to the upside we'll move a part of it up we'll put on some more puts in a position we know where we feel safe so let's give it a shot let's get out of here the difference Tony let's go to a 10 percent out of the money call okay I'm sorry we're head words 10 percent chance of getting in the money we had it up there before in the SPX swing 40 the 15 40 line there you can see market is 350 at 4:30 this is December now assuming you sold this let's just say for example the market started to rally up now are we looking at the are we looking at December are we looking at the 1490 in December as a as that being kind of that 30% chance of being in the money as you can see at the top of the page or are we going to kind of a November option so what I'm saying is good we're looking at the December December position getting into yes position getting into so if your new probability of being in the money on the 15:40 call was actually 30% that's a trigger to use the trigger that I got to start looking at something see something see what the markets doing what's my assumption on the overall market and then either do something by rolling up the calls or selling more putts if it's gone from 15 to 30 it needs my attention I need to be watching it and we're watching it as it moves up but if it's time to do something and tons of time would and time left in the in in the expiration would also come into play right so I made the comment last May that since we're selling premium once we get the money we're not giving it back and what I mean by that yeah you said that in the first thing if you've got a lot of emails about so if that position gets into trouble and let's say for simplicity sake it brought in $1,000 sure and I may have to spend well if I have to spend 2,000 to roll it up and get it out of trouble I'm going to get some money from some premium by rolling it up and we'll make up the difference on the put side or I'm going to put a few more contracts on the call side okay so let's understand with further out and also maybe sell some but this is a fundamental difference between the way almost everybody trades including myself this is not kind of a traditional methodology for rolling up a tested side the traditional methodology would be to roll up something else or to you know make an adjustment whatever what you're saying is and I just correct me if I'm wrong but what you're saying is you get to that point where the mental kind of that mental number kicks in where you go from a 10% to 30% chance and the next adjustment that you're making is you rolling out in time to reduce your Delta risk yes you're either covering some of that position and and which cost you money and then to make up for that you're selling more of the other side in this case hood side to make up that same money so you don't so that theoretically when everything expires you're back at the same spot back at the same spot I don't care where it comes from I don't get emotional about any position let it go I fix it do whatever you have to do to just make yourself whole at the expiration date so we don't care what it takes as long as it makes sense and what we're doing we try to make these decisions who are not putting ourselves in greater risk but the markets been moving up like that and say we've got puts on that we put on it 5% probability of in the money they're probably now down to you know less than 1% sure sure we can put more puts on higher we can maybe go 10% if we need to but with the knowledge that what the market is showing us that's a pretty safe bet at that point so whatever it costs us to get the call out of trouble we make up to make that difference I have have you and please show the short the 5% number up there to Linda 5 percent of the money um have you effectively uh gamified trading to just a numbers game like did you like in your mind before before before we thought of this because I like to take credit for everything before we thought of this did you effectively somehow gamify this so that not that you knew that you know 5 percent equals 1.6 for Stan but but did these did you try to make it into a numbers game you don't have a market opinion to you I don't and I love that word it is a big board game to me I mean I just love it that's why I enjoy playing it it's a challenge it's but I see it is a big game it's numbers to me so when you can put that objective viewpoint into it you don't have feelings wrapped up in it and it's just a look at the numbers and I know what it means to take a loss and we have made we have taken losses but overall percentage wise we have a heavy percent that are winners because we just look at the numbers it's just an unemotional process that we go through has has your biggest loss been larger than your biggest game in a month time period or not look no no no I'd have to think about that I mean we've had no losses in a month this year last year we had one month that we had a loss and that month was remember August Slamdance and August the margin requirements changed on us and we had to close down positions to get our analyze tab back into sync it happened instantaneously so without any sort of warning we had to just go in and start closing positions down it is that creatable is there a I get a lot of questions regarding some of the ways you trade with respect to we love the the simplistic nature of it simplistic strategic approach simplistic underlying meaning very few lines very very very low-key on the analytical stuff and a very low-key approach to the markets in general not trying to overanalyze and no noise from the outside no news you know very little technicals everything it so so is there a delta number like is there amount of directional risk where you start to get uncomfortable or is it all tied into that 30% number honestly it's tied into the 30% number well it I'm you may be able to teach me some things that I can do better but what we've worked through for the last few years we just tied into that 30 percent now 30 years of trading says that I can't and thirty years and God knows I've tried I see that it works for us it just it works for us so so good ain't broke don't fix it no philosophy I completely understand that do you do you get into a situation where you will use multiple products so for example you said that your primary product is the SPX which is the sp500 but will you get into a situation I'm not talking about pairs trading I'm talking about like where you have a position on it in the SPX will you potentially because there's a higher volatility in the rut or a higher volatility in the the NASDAQ and the ndx would you consider trading different products and do look at those positions having some relationship to each other or are you pretty independent in you know the positions it's independent we had one year I don't remember off the top of my head that Russell we made more money in Russell than we did in the SPX and that's very unusual for us it was just a good year for us I think maybe it was 2009 with our analytical work honestly the SPX just comes out on top over and over and over so we sit there and think why would we want to put a trade on the index when we can get a greater rate of return at the same risk level on the SPX so I believe that the normal retail traders trading ten contracts at time I know you're trading significantly ideally problem finding liquidity in the SPX or anything like that no we we have not none at all and we're trading high numbers of contracts sure so the reason we don't try SP wise is cost sure when you're trading that volume if I was doing it for myself Commission wise idea what I'd be back I'll be back in a SP why there is there's there's a lot of discussion that goes on all the time about the the knee the need to use - and we do it on the show a lot we feel it's important to mix up different strategies I mean maybe you've gotten to the point where that's more of a nuisance than it is but but are do you still find yourself kind of going back to the well times especially when volatility is in that 1314 percent range like it is now do you find yourself going back to kind of some old school choices I can say you know what we should do a big wide iron Condor here we should do I mean do you ever do credit spreads or iron condors anymore no no we don't because we found by are you ready for this Tony good the naked play a little bit of silicosis taking better the whole world no I'm not from New York we can just get so much further out we just stay with the low volatility is it's given us a real challenge this year so we just told our clients we would have lower rates to return this year because of the low volatility you made 30% through three quarters they better not be complaining my expectations are always higher I like to dream bigger and then it just comes in the weight comes in at after a year like last year our investors have a lot of fun seeing the bigger returns but I just said this year with a low volatility it's just too difficult and we still want to stay in trading in those safe ranges there's a just based on normal marketplace cyclicality and based on trends that we've seen over the years volatility on volatility is you know just under a hundred percent so the expectations for the VIX for example to be to trade next year close to 30 as well as much as it's going to trade 15 you know those chances are highly likely so white so is it it can't wait or is it like are you going to get hurt in that process going from 15 to 30 or or can you or how do you defend that I guess is the best way that's where the dancing becomes really tricky the going from a high-volatility environment to a low volatility or vice-versa low volatility to high volatility it those are some dangerous grounds I did the analogy is like trying to turn a battleship around in a river it's just so difficult and it's time me we watched that we talked about it as a group that probably makes me as nervous as anything it's when that switch takes place if you're loaded up on the downside and you have one of those days it can make life very difficult is it a group decision as a dictatorship is a group decision or is it really a group decision I mean there's six of you you could be three three and split it's usually we talk about all the different choices and we agree as a group we've got a tremendous trading group in that small room we have CPAs and lawyers and people but people who have traded for a long time and where we all think very similarly but I love it when people come in with different ideas and we discuss it let's talk about that group of idle listening to those discussions those are all those are your friends yes those are retail customers today are all retail custom okay I just want to be clear this is not you didn't come to Chicago walk on the floor and say hey you you you in the blue coat the red coat and the green coat come with me to come with me to wherever home is okay you basically you're talking about your friends that went to the same investools class one of the that the lawyer met him in an investor's class okay it's freaking people out right now because so many people have similar you know have similar back they're all thinking how come she didn't meet me yeah Jill and I kept talking about that bagel shop we wanted open and we just started trading instead and found out that we probably made more money trading than cooking bagels prospect rushes to guess yeah so it yeah they're all people that I've absolutely let's talk about I have a couple more questions that I want to really want to get in there I hope you don't mind can you go few minutes over sir okay so there's um so all of a sudden volatility goes from 15 to 25 percent now the question everybody asks is okay well in hindsight if it stops at 25 minutes back to 15 you're a genius but what if it goes from 25 to 40 like at what point Karen do you say you know because you're lateral positions 55 days right at what point are you saying we should be all-in at 28% or we should be what 20% in like the hardest thing for people there listening is they're all thinking scale okay this woman scaled up somehow but I can't scale up and I gotta tell you it's not easy I get it so how does that work oh gee I see I don't think about it that way we'll just do what we do every day and as the as more money comes in we just look at our analyze tab and and you know we increase the number of contracts we're still playing the same game we're still in the same position we just increase the number of contracts so when the money rolls over you just keep doing it keep in mind we pretend as if the mark is already dropped so we start at a minimum of 100 points down so if the market starts falling the idea is we've got time to start adjusting our positions reducing our positions we've got time and one of those strong down down Falls to react to it and manage it and and but you basically go to ten ten percent probability success to the upside and 5% to the downside but okay so when you do that because this is important takeaway when we were traders trading index products the same way we would always maintain short premium and short Delta which means some we had some short directional protection on you essentially through some however you got there you got the same spot so you're your primary position is you're always based on what you just said you're always kind of short a little Delta and and your short premium and the assumption is if volatility expands the velocity of the down move is going that's going to protect you in the velocity of down room flash crash 2010 may 6 2010 um great day in the market dark day every time shut down yes Jill and I were sitting there by ourselves we hadn't expanded this level back then watching you turn your screens the way we do sometimes the markets not going right direction sure look drunk bad day try it works very well because there's black tape pursue that but what you do we talked with thinkorswim on the phone several times and we push positions out you're sitting there the Dow is following a thousand points in in ten minutes you don't know if Armageddon is hitting you don't know what's happening and we just moved positions out we increased positions where we had to but we went out into October November we're sitting there in April we essentially gave up our profits for a few months to get into some kind of safe territory we went into the bomb shelters what we were trying to do is just push everything for give us time so we can see what in the world is going on here so so we did we protected principle we pushed those positions out and we set there for a few months and waited until the markets settled down and from October through December we finished our trading out for the year yeah and we had a profitable year yeah you did in 2010 and then you killed him in 2011 you did great it is that the worst moment in the last five years that was that was the worst moment last August was not fun when we had a there's no reason why we should have had a losing month last year and those things real hard on me I take them I think how much money did you lose last August we lost a four and a half percent in the month of August for the month but we still ended up the year uh 53 percent so you lost four and a half percent of the month in the month of August which was your worst month worse much so that must have been about five million dollars something like that for five million dollars and then you ended up the year up 53% we'd had some really good nights we'd had some really good - you call yourself a traitor look at you over there take seriously Oh is not alright listen Karen are you sure we usually start 7 a.m. but obviously you can do things that he can do let's just start at 8:30 sensual when the bell rings you are 9 o'clock we'll get all this taken care of we'll go to breakfast we'll come back at 2:30 wrap it all up right dear sure that'll be fine you don't need me yeah okay seriously you don't need me um it's again III can't only because I've been there again I've seen every tick for the last you know something like 30 years trying to figure out and I've watched people try to oh I've watched people over you know constantly adjust and tweak and over manage and things like that um you are you don't focus on daily you look at your P&L but your focus isn't on your P&L your focus is on your numbers yes your your problems usually your standard deviations whatever you wanna call the numbers they are they are numbers to me but they are literally numbers to me so it's it's that again it's a big it's a big game board and I don't mean to belittle it but it's a process so we are all managing that process so that we don't get involved with oh my gosh we're losing here or we're making this much money or it it becomes money when the paychecks are written at the end of the month but you really concentrate on your net lick at the end of the month more than your net risk yes we do I mean you're always curse of your wrist but a lot of retail traders will always say I'm risking 1800s here and that's too much risk for me even though I want to make $400 on that $1,800 it's just too much me but you really concentrate on how much you can make yes inside your comforts yes yes I know I have some friends that say well uh I can only make 2% on that play for this month so that's not enough and to me to percents better than zero so if that's all I can do for the month I'm perfectly satisfied with that based on the numbers that you've thrown out here today and you and I talked about this earlier today you set a target for your positions of what you suggested is around 15% are around 15% for that 55 day period that's kind of that's another thing that goes through your mind and I'm just curious when when as you mentioned as you said when the light bulb went off in 2009-2010 and you moved from you migrated from risk to find spreads to to undefined risk okay how hard was that transition or was it just like all of a sudden you recognized hey I got to do this it was just as natural as it could be it's just looking at the numbers and this makes more sense to to move we can get further out and still make the same premium that we were making in the iron condors we can get much safer still make the same premium why wouldn't we do that we use the disk we use the argument Tony and I do all the time to individual investors that if you define your risk you increase your prop you increase your probability of success I'm sorry if you define your profitability you increase your probability of success you did that on your own like because that's not something that is generally taught in any kind of investor education you had to come full circle how'd you do that I really didn't know that I had done that until I met you so it just means I'm gonna have to get his head through the door sometime tomorrow oh I'm hoping to get a break oh you play cards right I get it just made mathematical sense to me to move in the direction that we moved I did not do any great analysis I just looked at the numbers and we just migrated is your math background do you feel like listen you can downplay your successes as much as you want to but there's something in there you know there's something that clicked somewhere else because it's not normal what's what's happening here so something clicked is it do you think when you look at some people say instead of that like not normal look at they were conducting and if you might say so you know it's extraordinary okay learn to do something that you know even I being you know the great one top song has not been able to do you know supposed to not normal like the was just run x-ray she would agree that I'm not normal at my math background in my accounting background I've dealt with numbers my entire professional career it just makes sense so were you able to take the stock market emotion which is what takes down most people is the kind of the ripping at your insides the stock market emotion the the perceived risk you're able to turn that into some kind of a numbers event and just and just focus on the numbers I got tired of that ripping the heart out I don't want to go to bed at night feeling that way I don't want to be scared of what's going to happen in the market so we just kept working how can we make this safer how can we make make it in my mind it's safer by going that far out of the money can't you mentioned 56 days so are you all in at 56 days 50 percent she said 50 50 50 to 70 percent depending on what's going on and will you have multiple months on if you're if you're at a comfort level we have multiple months I like what you have October and December now or the bad or December yeah we'll have a current and out month okay October is not 30 days or so to go in November what by the time we get to October 30th we will have closed in most of our November positions down and brought the realized income back into October so by the time we get into November there's very little exposure there really and what's left is usually just so worthless we just ignore it it also takes up our buying power on our analyze tab so we like cleaning that current month out and then we're you know the shovel again and getting back into did and then we'll get into December and hit December hard Karen there are some some people I know you use futures and futures options and not as much anymore but do you ever use products to control your volatility risk like the VIX would you ever consider like a complementary or hedge position if you if you're short a given your short professional levels hedge fund levels of premium do you consider like call spreads in the VIX that kind of stuff where you just totally avoid it we have done that in the past you haven't done it recently okay I go back and look at it now I'm only saying is what the low-end of like goes sometimes commodities get to the low end of the range so so what's next how linear is this bit meaning that can you actually scale bigger than you currently are or are you at a good comfortable number I am at a good comfortable number the fact that one of the funds the money the profit goes into the net profit goes into the charity I'm always interested there's a potential that will start I'd say one more fund set up that way and in my mind that that's it I don't want to manage any more than that but we can we still have room to grow how much of your life do you spend on the road working these charities I'm just curious like it's one thing to say okay I'm going to manage you know I don't gazillion short positions and all this kind of stuff how often are you actually just having the team we had gives me the flexibility I'm in Africa about once a quarter and I'm over there for ten days two weeks I think I'm in hell once a quarter something I don't leave this room there there was there are so many incredible little tidbits in here that I think people are going to to grab for quite some time the again I'll go back to the simplicity of it all there's this real Karen there's this there's this popular idea that you need in order to be successful you have to out smart or the game is rigged is the game rate and no not at all Remy and and all the tools are there for free for free that's that's who could bounce a hundred missions okay but still but so still you're talking about a hundreds of millions of dollars of business for with I could not have done this in any other way I could have tried to build a business I couldn't sell enough bagels to do this and this is redemption a lot of bagels it's opened up a world for me that is just amazing it's just amazing that that what this affords me to do and that's the work in Africa do you still love coming into work every day and just love it I love it I love it the first thing that hits my mind when I wake up in the morning what are the future's doing don't worry every single trader so you've you've crossed over into the dark side I am I am happily in the dark side I love it I'm Tom saws knife he's Tony Batista she is caring the super trader you

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Keywords: investment management, trader, options, option trading, finance, hedge fund, indexes, stock market, millionaire, charitable fund, investment, investment fund, tastytrade, tom sosnoff, karen, karen supertrader, karen options trader, karen the super trader, tony battista, tastytrade network, tastytrade live, tasty trade, Trading, index investing, options trading, spx trading

Id: BquDGE9KxZQ

Length: 51min 37sec (3097 seconds)

Published: Fri Oct 26 2012