I was literally driving Uber and people were like oh how'd you get driving Uber be like well I just got laid off and I'm actually going to trade full-time have youever heard of zero DT options that roll the dice with everything you got exactly how do you start figuring it out test trade track and be curious over the course of two years you're now up to 1. 5 million that's when it really clicked for me you are the ultimate one trick pony right at 9:32 once the opening price Discovery occurs I will basically start trading credit sprs every 2 minutes into Mark n FS [Music] all right everybody welcome back it's another Rising Star shoot I think you guys are going to like this one something a little different we are going to explore two things that we don't usually do on Rising Star shoots number one is we're going to talk to somebody that's gone from being a retail Trader to kind of somebody that's stepped it up to being a full-time gig that's one thing and the second thing is somebody that's also taken a lot of the tasty trade mechanics and adapted them to a zero DTE type of trading style and uh somebody that trades 100 to 200 times a day somebody that trades um very aggressively my uh kind of a style I like a lot um and so I'm excited to have this conversation and learn more about you as well get your helmet on as we say because here we go so you're 30 yeah when did you make your first trade uh I made my first trade in 2017 2018 it was basically I read some Warren Buffett stuff my dad had been trading options for a long three years time he introduced me the concept of a covered call so I started playing him on Facebook a little bit and was interested in the financial markets kind of Dr my dad and learning about that as well so 2017 2018 kind of a pretty um strong Market low volatility strong Market um definitely at that point probably anything that you bought went up correct and um and you sold some calls against it so you're like oh this is easy easy pey um so let's talk progression so you're you're kind of just starting out what were you doing for how were you supporting yourself uh I was working in construction as a superintendent I was PR interviewing kind of like Seno manufacturing and Drg manufacturing plants of the day area alongside Hospital construction okay so construction that was your undergraduate degree too for got it so um so you're kind of doing what you had prepared to do and did you get did you get bit by the bug yeah or or was it like was it slow or you just get bit I realized very quickly that what I had signed up for in college and what I thought was safe was actually risky in turn by doing the same thing that everyone else was doing and kind of I was affected by the upward drift and financial markets whether I liked it or not so had a lot of time commuting from work and started just pick up on podcasts and such like that which is where I rolled into you guys you know it's it's funny sometimes people they rolled us because it's it's like it's something that you feel like you have a little bit of control over and I a lot of times there's some disenchantment out of school where you think oh man I just lost control of everything like I don't control my own destiny anymore and so they end up with us because you're thinking well this gives me some control back now definitely and the way you kind of speak to it is here are ways to extract Azure why we think it's present and here's data that best basically backs that and that really resonated with me where it's like here is a construction drawing I'm looking after here's what makes it structurally sa and when we follow this we use to get our output are you kind of like a a little bit of a math geek or um an engineering geek a little bit Yeah I think everything really comes down to the details of it and I'm a big advocate of the simpler it is but the more dep you understand all the concepts around it that's what true Mastery is and kind of the way you guys explain those Concepts I think is a good emulation of that so Finance just quantitative Finance just made sense to you like it wasn't it wasn't something that seemed very foreign it seemed like oh I can figure this out yeah it made sense basically from day one and then what really made it click was when I realized the quality of your assumptions around that is really what it gets into too and when I started tracking everything and inputs and outputs I kind of related it to test trade track and be curious yeah and that is really kind of the formula to seeing what fits you and then optimizing your strategy for conviction instead of return so you can follow through of that get what you bought so 2018 17 18 19 whatever when you're first starting out you're obviously working you know you're you goes into the pandemic and you're still I'm assuming trading a little bit on the side investing a little bit on the side working your butt off in what in in the construction you know engineering side of the construction job and then what happens yeah so at that point I think it was like most people where you're trying to put in 10 15 hours a week in trading and then you're working 60 hours a week yeah and your house success you get in a meeting you know try to have a life too everything yeah see super buzer goes off when you're in a meeting you're like that's not okay and then uh I'd made it through Co relatively okay because you know I'd taken some positions off sure uh but then i' had gotten laid off you know I was in construction I was with skyscrapers at that time it was no longer needed and I basically decided that day that I was like I can do this I to leave it the difference is like I have complete control over kind of what my Destinies have been sure and I started to again find another job but really go all in now and kind of put my job on this was a second priority and trading as the first priority not advice that necessarily lend every one but that's when it really clicked for me it's the kind of thing where if if you're not going to roll the dice at that point when would you like like there's no risk to you at that really at that point to to just say hey let me give this a try because the downside is all right I start over anyway yeah and the upside is maybe maybe I figured this out maybe I or maybe maybe my timing is perfect and maybe I'm just entering the space at a time when you know they need 25 and 26 year olds that are strategic that can understand a different kind of a different Road through Finance yeah and I like that you bring that up too because one thing that I kind of related to when I got into there's obviously compound interest which just making money but there's also the concept of compound knowledge whereas if you start something at before it's 24 25 and it really gets rolling it's a hockey stick return on your ability to learn at that it is very hard to impress up on people how important longevity is just you have to play the game you know I mean like I mean Buffett's probably the greatest example because it may have taken him you know 50 years to get to the point where he could create some kind of um exponential return but but it's all about longevity and I think at 25 or 26 it's very hard to Envision you know it's very hard to consider longevity because you want instant gratification so you so now you're you know mid 20s and postco you've I'm I'm going to fast forward some of the story for you you've you've made a little you made some money you have a couple hundred thousand correct through real estate or whatever else you've saved up your whole life that's everything you got right you roll the dice with everything you got exactly okay when you decide to go full-time as a Trader late 22 or something yeah okay and you were like you're like I'm all in I'm going I'm I'm I'm going to take this to zero I'm going to be zero or whatever right yeah okay cuz I love that um so so okay now what do you do like like how do you how do you start figuring it out how how'd you you know I mean obviously had some idea but how' you how'd you make it work how'd you figure it out first thing is just like proximity Is Power and modeling from other people that were doing it so I consumed as much information possible watched your guys' show and was originally exposed kind of look back at that point which is the first back test right thing I'd seen and as I got into this I was like this result does equal that I can make money when this happens and I saw that even when I took draw Downs it matched the back test so I really started getting into the quantitative part and the numbers part which is like you're talking about how do I enable that compounding with limiting the draw down what I like to say is I'm locally concave for income and globally convex to basically limit draw Downs which the liability to so what was your worst draw down like you're basically been you you basically have two full years under your belt two full years of which your returns are extraordinary we'll talk about a little bit but have did you have any really bad draw Downs in those periods um I was running like a 90day gold TLT S&P structure uh during the Russian invasion of Ukraine and that had kind of taken me about a 20% draw down but apart from that was zeros my largest draw down has been about 8% from that time forward and it's been pretty good quarter yeah yeah I mean 8% is is really nothing given you know given some of the returns and then 20% during that one event just when you're starting out is is also like pretty small yeah on a Rel Bas so you really haven't had to feel that you know the crazy pressure of yeah yeah yeah what I like to say is that you know we should look at ourselves as Risk Managers first and then kind of capital allocators second what has happened to you since you well like you talked about the Russian invasion of Ukraine and then you know obviously trading a bunch of different products at the time it sounds like you've you've more um transitioned into essentially just trading in the snps correct the S&P is very accurately priced fall the friction cost to get in and out is extremely low which I think a so to find friction cost this would be priced across if they asked to get in and out of positions and then also with the SPX being cash settled with no rism assignment and then also the liquidity of it in general with the width of that bit ass spread and then the fee structure and commissions on such a large instrument are relatively low that I think it's the best aenue if you're playing a pure short ball perspective to take and what do you think is the B what what how would you um Define or quantify the bid ass differential of the SPX uh I would quantify as the price to cross it to meet from a buyer to meet a seller right so what do you think that is from my data it's about 2% on the entry and about 5% on the exit if we using a stop it would also be about 2% 2% of the of the premium or 2% of the not the price of the index no the premium yeah okay option got it so if you're doing a if you're doing let's just say uh what Delta you usually hang around with uh I'm usually in between about the seven and 20 test so okay playing crosis basically right so so you're probably in the neighborhood of I'm just how far out oh you're always doing the the zeros yeah okay we'll get into that in a second so the zeros at that Delta you're probably where are you somewhere in like the $6 range is it um it depends on the volatility and it depends how long you go to buy your wings uh I do go up to about about $4. 50 but okay I do a lot around a dollar to $3 seems to be a good sweet spot as well on each side or total uh each side I do lean a little more on the blit side for credit selling and then I'll hold longer dated calls so I kind of look at the call side as a sharp buffer kind of for combo so you skew it a little bit yeah I mean we're always kind of skewed in the SPX because of wing price so if you collect like a dollar on one side and a dollar on the other yeah oh you're going to be you're volatility risk is actually kind of weaned a little bit yep and then and then and you're talking about 2% on that number yeah to get in to cross the cast for the that's so that's just for for under so people it's a half a tick basically H it's a you know half a tick two cents two and a half something like that and then on the getting out you think it's like double that correct and that's an agant it could definitely in times of high volatility be 10% potentially but over enough occurrences yes and that's that's closing correct yeah are you are you ever letting things expire or you mostly always closing uh I'm almost always letting them expire because that kind of view that us a way to get 2% Alpha from not closing it obviously if I'm threatened and I need to manage my risk that comes foremost so if that Delta is kind of getting close to the money that position's definitely coming off at a predetermined risk ratio as I put the trade on right because the the offset of um the other side of saving the 2% or the 3% or 5% whatever it is on letting it expire the other side of that is this massive potential Delta risk with two minutes to go correct which I would like to avoid as much as possible the way I think of managing my risk is I want to limit the degradation of adjusting those options to capture the premium but I also want to use risk management basically shaped re form of the distribution that I like and and you only use SPX right you're not using spy on the SPs okay because with spy you'd have you know post assignment risk you know postmarket movement stuff like that the SPX SS to cash so at 3 301 or whatever the last ticket is you're basically done correct are you ever using anything other than o SPX options to hedge zero day SPX options like are you using ES or the The Minis the micros the es options the Spy anything else just STX okay so you are you are the ultimate one trick pony correct and also when we talk about hedging to is I think a lot of people do hedging kind of after the fact like once they get threaten on in positioner but I always if I'm selling a credits beted I'm basically buying a hedge for it exactly the same time so I'm buying and selling the same fall so it's basically even out to offset my exposure systematically yeah but let's understand when you say credit spread you're really not trading a credit spread you I think you're really just trading you have a synthe what you call a spread because you're buying some cheap way out of the money option but the reality is that is just a synthetically naked option it's a synthetically naked option yeah you you're just doing that for Capital reasons and you're doing that for risk reasons but you know I mean you don't really that money is just a give up money correct okay yes so are you going to like the cheapest option you can find uh yeah within reason 99% of days if you're going 200 bu or something you're basically getting a nickel Wing but yeah nickel Wing but are you the only reason you get nickel wi is because it's a zero day but are you doing are you going longer duration so I am holding longer duration options that I basically start legging in in about a week out and then I take those up to one day out and then those will be all long options and by doing that I can kind of capitalize on maybe large overhead moves or if we get an extreme Market Direction even though those long options kind even out to zero in the long term it benefits your portfolio and can offset some risk it's zeros so you just hold the and then just work everything else against them yeah I'm just holding those to expiration yeah they offer you some offsetting of margining and then they also offer you I would to say diversity of risk as well so yeah we're looking at our sources of profit we have credit spreads obviously credit spreads can be uncorrelated but when you need the uncorrelation the only thing that is actually going to be uncorrelated is going to be wo now are you always doing are you almost always vertical uh on my on on these credit spreads is it is it always vertical are you ever horizontal do you ever go out like are you doing you know uh one DT 2 DT 3 DT I will do some calendarized structures I think those do offer a lot of Edge and kind of having more of a bega will help as well so I do offset with Cal Resturant so tomorrow morning um first thing happens Market opens yeah are you already in a position from the day before that you set up or are you putting the position on in the first half hour two minutes both so tomorrow morning I will have 7 Days six days SP four 32 1es all along and then I'll also have a one day that I put on at the afternoon before that'll come to zero and then right at 9:32 once the opening price dis February occurs I will basically start trading credits where it's every two minutes until Mark hand looks every two minutes until like 350 basically so you're just going to continue to lay them out correct basically like as the market moves it will yeah you're not doing both sides you're just doing one side of the time um I'm managing each side individually but I'm putting on trads as condo so at the end of the day how many positions is that uh it comes out to between 15200 depending on the trend which all basically go with if it's tram in some certain direction and because they're all you can afford to do that because they are all technically spread off correct on averaging in the volatility over the course of the day so volatility could be extremely I get it what happens what happens on a day obviously on a nor on a regular day where there's you know some contraction whatever you know or we either in a l state or Contracting State you're fine what happens on a day when you know uh Market goes Market stays unchanged vix goes up big Market stays on chains vix go Mark goes down vix goes up big what happens uh it's pretty random I would say that very large moves toward the end of the day when to have more you have Boer at the same small Channel I'm exposed to but if we rip off at like 10: a.
m. from some data announcement yeah you know twice the standard deviation of move and that we go in something you could be completely fine what percent of your trades come off at the end of the day uh shortfall 100% so any credit spread is in cash and then I'm I'm always long the Tails long G long VGA and long Delta every day 4pn and and 99% of my account in cash that's really interesting so you take the crap home with you and then you just start laying it out the next day so you don't have to deal with buying the wings again correct ah very interesting so I should I should give a little more context here so you started out when when you first decided to commit to this business essentially full-time trading you had a couple hundred thousand do correct and over the course of two years you're now up to 1.
