Surgeon Uses Options Strategies in $SPX & $RUT to Boost P/L

and Thomas you back my friend rising star dr. Larry and dr. Larry in the house how are you great thanks to you we got Larry the limo driver yeah we got dr. Larry yeah not two to the same people could be we've never seen them in the same let's get does welcome to Chicago thank you how are you I'm doing great you and I have talked over the years we go back to way before tastytrade sure which is cool and back to the old thinkorswim days and everything else but and we've communicated probably for 10 years I would say you know emails and stuff like that maybe more than that that's great and I it's so fun to have you here so welcome to the show welcome to Chicago and everything else I heard you had a great weekend here and everything else yeah good weather Cubs you know Yankee fan yeah you can't what I'm here was a Cub fan yeah yeah of course Chapman look good thank you so let's get a little background Beth could throw a little background up on I'm Larry we have something in common we both went to the same University that's right oh I love telling people that's he was the most famous alumni so you are a foot surgeon in New York and and yet you find time to trade let's talk about that just in general like what's the what's the attraction to finance and markets and and you know and trading for you don't you get enough you know excitement out of from ingrown toenails and whatever else it is I like the challenge I mean it's it's all about math and I do I love it's it's just a lot of fun for me as well as profitable do you think that do you think that that there's something about like because I always joke about like you know a relationship I have with lots of different doctors as far as you know questioning like do you think risk-taking and medicine or something that go hand in hand seems to be one of those professions where or is it the challenge is it more about the risk-taking or the challenge I think it's more of a challenge it is yeah the challenge and and what's what's the challenge like like for you what's the challenge you know can you make a certain amount of return is just a straight dollar amount like what is the challenge where is it an intellectual challenge so I feel like it's you versus everybody else it's probably the most difficult thing I've done that includes going to med school and trading has been much more difficult it's and it took me a few years to get profitable but I've been profitable for almost ten years now and the challenge is amazing they've always said there's always been this and I know you've heard this but they were so this thing like you know doctors are the worst you know quote investors or something like that I knew back in the day if I was standing on the trading floor and the guy told me he was a doctor or an attorney I was like this is gonna be great because like you're their specialist and once and I always thought that that was the challenge to like guys like you was like you know or people like you was always you know they always tell us we can't we're not good and I have to prove that we are type of thing I've seen it myself in my profession most doctors then sorry to the doctors are bad business people in general and trading is a business I consider luckily I was kind of brought up that way my dad taught me and I run a three businesses right now including the the trading is a fourth business and I've just got a natural excellent for it you know doctors aren't bad business people it's just that they're it's it's just something different you know the any I'm a bad I think I'm a bad investor too when it comes to like judging outside things we just don't have the time for it you know but know how all the time but the training thing I think is something that you know we can all it's a math model how long you been trading stocks a long time options since 2004 since each other for how long in your hole in the career of trading and everything how long did it take you before you'd figured out that there was something mechanical there was something to this where you can you know where that you can turn this into something where you could turn this is something that won't that you could count on you know work for you the first two or three years were very difficult I was I read textbooks I'm self-taught went to your lectures that think of swim at first it was very challenging to become mechanical and then they have to kind of clicked that I realized that there's the the math involved and treating it like a without emotion numbers not money and being mechanical I'm constantly improving that but that took a long time to do when you first started a numbers not money is it pretty that's a pretty powerful yeah it's pretty good when you first started out Larry what were you doing it first like 2004 - I think it 2007 look before we get to 2008 for 2007 the first three or four years yes I started my own practice in 2003 okay and I had some free time I was looking at the walls waiting for patients to come in so I I was scared some stock - my dad was a stock trader so I learned in under he's punching the telephone as quotes you know for the Internet and the newspapers so I'm sitting my office my now friend then landlord came in and he said are you trading stocks and he said yeah yes I trade stocks but I sell calls against them to cover the calls and I said what's that and he took five ten minutes and told me that dad went out and bought some books uncovered calls and never looked back I've been I started covered calls against the stocks that Reddy owned and then I discovered the poor man's cover call the diagonal and I started doing those and from there it just escalated from there when did your trading start to when did you start to like ramped up like what would you say was kind of the the defining year when you started to commit a lot of capital break pretty quickly actually probably 2005-2006 I was making some money my practice and yeah kept reinvesting that money okay and when did you start to ramp up like the amount of trading you were doing like just just in general you know commit like instead of doing I don't know 5 10 20 trades a month to you know significantly more than that yeah probably run 2005-2006 really so it was right away yeah when did you start turning profitable for the first time right about that actually the first three four years - three years but not profitable they after that started profitable and and what was the what was the turning point with respect to strategy you know for profitability some premium iron condors mostly doing skip strike iron condors had some bias okay and so you doing like you were doing some defined risk stuff when did you start to wind it out and get like you know a little bit less a little bit less definition around that risk so and start to open it open it up I guess so I think you're making an assumption that I do train on defined risk trade um being that I have a full-time job I might may practice if a group practice before doctors at work for me I own an MRI practice I do a marketing business I don't have time to stand from the screens all day that's fine so in the morning I have an hour in the morning half an hour at the close half hour for lunch or so that I do my trades so I don't like putting undefined risk trades on so I'd rather do iron condors and strangle do some big wide iron condors - yeah exactly yeah there's definitely some risk there yeah but I can't get blowing out if I'm not in front of the screen especially on Fridays I'm in surgery all day yeah patients wouldn't appreciate me trading and during surgery trade right now I do probably five to ten trades a day five to injured Sam well that's a lot yeah but the five ten trades a day is you know I mean in fairness that's yeah you're talking somewhere between 100 and 200 trades a month that's that's a couple thousand trades a year yeah I mean so that's not you know that's pretty pretty level of participation what was the best year you had in the business by far as 2015 2015 yeah 2015 was a great year for premium for any kind of market neutral strategy would you consider yourself a market neutral in general or orden or do you have a market opinion I always have a short delta always so always a short Delta with some kind of but but short premium collecting data though long Delta I actually do a strategy which is interesting I think it's free insurance so when I'm short Delta I'm also short Vega and as the market moves up against me the Vega comes in and I lose less money I can roll things up and down the way down the short delt is usually outweighs the Vega and I just get out for profits it works really well yeah well that's the approach that we I mean we all take that very similar approach when when you say 2015 was your best year what well I see up on the screen it says you made 79% 2015 amazing year yeah that's incredible year and yet you're still single is that that's not the first thing that comes out okay get him off he's already he's already all wired up this might figure that out in 2015 what was the difference-maker as opposed to all the other years was it just the fact that it was the market accommodate you yeah definitely yeah I mean the market that when the market gets a little bit crazy you know the it makes things more difficult when the market accommodates you it everything works yeah there was volatile to sell and went sideways so if you told people that in 2015 you made 79 percent and remember in 2015 it was big we were basically it was another year of a 0% it was interest rates for zero do you find that like something so weird that you could make a ridiculous amount of money like that and and you probably don't even think he took that much risk yeah it wasn't much risk I think ID mailed you a few times during 15 I have patients in New York City I'm in Midtown there's lots of traders hedge fund guys bankers and they become yeah this suits you know they look nice they come in and they tell me that that's a rough year and I'm thinking I had a great year we talked a couple of them asked me to see the platform I show them my spreadsheets in my platform and yeah so they they had a bad year hedge funds and I had a great year so it's interesting it's kind of weird isn't it yeah what do you think over the years let's talk a little bit about you mentioned I like to at these kind of segments I like to talk about really specifically about strategies so give me an example of like positions that you're putting on you know that you're putting on today that you're looking for you know when you make you know five to ten trades a day or whatever it is obviously some of our closing some of them are adjusting whatever it is a lot of rates a lot of roles and stuff like that but when you're putting on new positions what are you looking for so depends on the environment in a lowball environment it's hard to find trades I do my skip strike iron condors usually when you say skip strikers or what does that mean so I sell day wider strike on the call side it's almost always in the rough to the SPX I do a ten point wide or a fight and call sudden five point win the put I checked out the short Vega long theta okay and your and your basically by doing that you're you're not doing it so you have no risk to the downside but obviously have less risk than outside sure there's always an inflection point on the downside where I can get out for a profit as long as that's the huge gap down which usually doesn't occur yeah even with the big ups kept down doesn't hurt car yeah and how tight to you what are some of your management skills are you following kind of like to manage a 50-percent manage as early as possible do you you must roll quickly yes so I sell 30 Delta on the call side and put sides that's I picked my strikes okay the on the way down there's a you know the today's I use the analyze tab a lot on thinkorswim okay I look where the maximum profit is for the trade on the way down and I put in my limit orders in the morning and I get out for profit then and on the way up it hits the short strike or for gaps through it I roll the call side up and I can roll three four times in a low violent five six times in higher value environments where I can roll it up and still get out for a profit I'm take on more risk but I can still get out for a profit so my best trade to the ones room I'm down 1020 thousand dollars and then it goes down and I get out of even and I'm very happy yeah no no of course that and that that's the way it works for anybody you know have you had has your mind started to work in such a way where it's it's just like do you look at how do you look at this but you don't think about this as this is not an investment anymore like you're not investing hoping that something's gonna happen you have to think about this differently now this is this is trading you expect to make money I guess that's my point yeah I mean watching you guys has been helpful obviously you guys the research you do is amazing the 50% rule I love that like you mention before I do get out of 50 percent but I don't take the whole the whole 10 contracts 20 contracts off I'll do two at a time see where it goes and I'll just take profits as it goes up from there yeah and then I'm very mechanically I I well I think the markets are go what direction or not means nothing if it gets to a certain point I do my roles and I regret it sometimes but most the time not it's very mechanical no I have no regrets to now right I mean no no I'm being serious because you kind of I feel as I'm the same way like I'll try to I do my best to stick to my mechanics all the time and it seems like you're kind of sticking your mechanics to it and sometimes I feel like hey you know nothing and I should have trusted myself and other times you say you know hey I can you know I'm glad I did this kind of thing but as long as you have a baseline on what you're going to do it makes it so much simpler like I have to do it mmm you should have an expectation now about making money like Jenny this is the hardest thing for me to to contribute to the industry is that to get people to have instead of saying wow I really hope I make money yeah it's like you have an expectation now you've tasted you know you've tasted really great success you should have like I mean you tell me yeah definitely I mean obviously I accept my losses that that's part of the market you can't predict what the markets gonna go with yeah I do expect that every year I make a small profit or a big profit yeah what kind of what underlying she said SPX and or UT what are there underlines to you trade so I stopped doing underlyings that were individual stock to set the Samara next rates when you do the earnings trade just to keep yourself for kicks and giggles yeah small very small okay I'm almost always in SPX and SPX p.m. recently have emailed you about that and ETFs I've diverse ETF's you know the non-correlated gold bonds international all different kinds of ETFs that I do are you product are you pretty product and different though you don't care oh yeah yeah do you have any more covered calls I still do cover calls you still though I use protection i buy puts against them long term put so synthetic diagonals mm-hmm I liked collecting dividends on my cover calls to you do you think that the is the system is the challenge still there for like the challenges Lester for us forever like do you see a point when you're not when we're going to look at this stuff and say I I'm done with this like there's never time is there no I love the challenge it hasn't changed a bit for me yeah it hasn't changed a bit yeah right and and you don't have a problem I mean you say you know you have an hour here half hour here or half hour here but you fit it into your life yeah you've even started other businesses too inside of this I mean so you're not only trading basically full-time because I think I trade full-time even though I'm doing a show here full-time and other things involved I'm learning to do a show to do a show part time and learn to be a good husband father it's hard for the exhort for Larry he's heavy I put my back and it's like oh my god I like to talk about trading as it as it changes your ability to make decisions improves your ability to make decisions and to change the way you look at other businesses Dean can you relate the skills that you've developed in trading and and watching markets and kind of taking the numerical side and converting it to decision making you know are you a better decision maker now in your medical practice in other things that you invest in you know because that's my argument to people they're like why should I do this why shouldn't I just be a passive investor well forget about this seventy-nine percent return because who knows if you could you know recreate that or duplicate that or whatever but are you finding other advantages they just say that I think it's kind of the opposite of being I think they're my trading skills and an ability comes from my other backgrounds of you know my going to med school and medicine and good decision making in general let me rephrase the question I was just kidding I have a serious a because we argue because I would disagree I'm gonna tell you that I mean my feeling is that that a lot of the skills that we you know the decision-making ability from trading but II just that you you're forced to make decisions that you're not necessarily forced to make you know the things that's our argument anyway but it's interesting how you how you look at come back the other way in surgery you don't make decisions you know this is very quickly and they have to be right you know there's no such thing as a surgeon it doesn't go perfectly yeah so you'd fix it until it's right so it's kind of the opposite I guess yeah that's I don't think about that but anyway we approach them that way when you look at your risk which is another topic that we like to talk about you know how we're pretty much especially with defined risk trades we kind of back off a little bit and say you know it is what it is how do you how do you look at risk and what's your biggest drawdown so I look at risk from a portfolio as well as each individual position as a portfolio first of all in life my risk is I trade about 20% of my my assets 80% invested other things of that 20% I never risk more than 50 occasionally 60% of the whole portfolio okay and then each individual position in my smaller accounts I arrays I never risk more than 10% per trade and my larger accounts 3% per trade okay you said you have spreadsheets so you do have a mathematical kind of mind behind the trading - you don't just kind of fly off the seat of your pants yeah I keep a very strict trade journal I note what works what doesn't work keep track of every trade in a spreadsheet what's your percentage basis so this year was kind of challenging for me I was I was down probably 20% this year but now I'm back to even okay in February when when the mark went down I was in a great position I decided to sell Val with two hands like Tony says and I did not expect such a rally and even though the vol came back in I had a nice big loss from February the move was too big today after short Delta for sure exactly and I had a rough year I'm back to even now which I'm very excited about it's not unusual at least I don't find it unusual especially like when I'm hitting on all cylinders now you're going from a year or 2015 I mean I don't look at it the same way like 2015 was a great year I kind of go through quarters or a months where things are really clicking if things are really clicking woman sometimes you get pushback you know to earth again 2015 messed you up in the sense that I mean it's listen it's great is a great year but what it does is it gives you a little extra comic on February Cameron you're like well this is you know waiting for this chance opportunities crazy volatility and in listen we did the same thing we took a drawdown in February - and it was a that was a tough one for us that well not on the way down yeah but that's that's normal because listen when they go from 1800 back to 1950 it's normal to some there you weren't expecting go to 2100 right you know I mean that's that's that's okay that's normal but um but the fact that you came all the way back that's impressive - yeah there's a lot of work and I think my Commission's are three or four times they were last year already yeah crazy and out of roles I did yeah but that's okay yeah I mean that's part of the cost of doing business exactly is the what do you look what do you think going forward from here like what are you thinking about because we kind of do the same thing we just we just try to make it we just try to get better at it how much better have you gotten over the last like a couple of years just in general like the mechanics of everything you're doing because I want people to you know understand how how they can improve their you know overall performance their ongoing performance I feel like my skills have become exponentially better you know the more I do it the more I listen to you guys and the research you do it's just it's gotten so much better I mean it was good and now it's even better the mechanics of it's the way of trade what scares you it's a good question obviously dating but besides dating yeah you know this crashes to the upside which shouldn't occur you know these three sigma events on the upside that's what scares me really yes I've lost money yeah yeah that's so funny because when you think about that like just think about what most people are so concerned about it that's not it completely the opposite yeah it's completely opposite I think my friends already know when they have a good year in their 401k or a good month or so I've had a bad year and vice versa so true there's anybody all right have you been deep you're gonna find it it's gonna get more and more difficult to have those conversations with your friends because they're not gonna want to hear you know how you're making money when they're not going right yeah but have you been able to turn anybody else on to this you know or is it is the cell just too hard yeah I've had a few people in my life that I've talked about people that are somewhat finished financially sound my friend Julio is with me today is one of my employees my marketing company the first day it came into my office and he said is that thinkorswim I knew I liked him then and he's 26 years old and he's putting on small trades in the spy and then doing himself it's very impressive and we talk about all the time so I brought him with me today that's that's so cool Larry was great having you here I mean you know we've been friends a long time and and but I never don't talk this you know I'm saying it's like I try to be careful about getting too too deep into you know personal stuff but I think your success is great and and I think it's so cool and I think it just shows every but you can do you know you can you can multitask which has been my argument all along and managing your own money is something both challenging and rewarding yeah it's a lot of fun for me as well as a great source of income yeah thanks Larry where can I send the pictures to if somebody wants to reach I'm just kidding we're gonna take a quick break we're gonna come back the opening bell is next as a taste trade live hey guys I hope you enjoyed this video click below to watch more videos subscribe to our Channel and if you want to trade along with us visit tastytrade.com

Channel: tastytrade

Views: 30,111

Rating: 4.9306931 out of 5

Keywords: trading, trader, stock, market, finance, learn to trade, beginner trader, options, options trading, tastytrade, profit, trading tutorial, investing, how to trade, double diagonals, $RUT, $SPX, interview, covered calls

Id: Isv8EOpOWWw

Length: 23min 11sec (1391 seconds)

Published: Mon Oct 31 2016