JULIA SPINA, AUTORA DO LIVRO "O GUIA PARA OPERAR OPÇÕES DO INVESTIDOR SEM SORTE"

[Music] so hi everyone i'm here with the one and only julia spina and um here it is the the masterpiece by julius pina yeah the then lucky investors guide to options trading the book who just came out by julia and then it's a book about options and pretty much focus on just selling options um is it really a complete booking is actually the title uh sums it up is a guide to for you to trade options to do the best uh strategies and um how to sell naked options how to yeah volatility and all this

kind of stuff so julia is just um this is the copy i downloaded from um i bought it on amazon and i downloaded to my to my kindle you can download it from your mobile device here in brazil we cannot buy the the book the actual physical hardcover book but uh julia just came he came out on last month right yeah it came out on february 23 so like about about a month ago maybe a little bit more um i'm definitely i apologize in advance for the the e-reader version because i think it's a lot

harder to read than the physical copy you can still get through it but the graphs are all over the place the tables will be on different pages but everything's in there so that's good i think they did a pretty good job yeah so congratulations julia on the book and thank you for for finding some time to chat with us uh today so um uh we'll talk a little bit about strategies about options trading but first julia how do you you came up with the idea of writing a book what inspired you to do it i

wish i was smart enough to come up with the idea it was actually tom's idea um he kind of wanted um some researchers to write a book and uh it was anton and i that kind of put the whole thing together uh anton was kind of more of a big picture guy so he was we were collaborating on what kind of content to include but like in the in the bigger picture i guess like retail trading options included have just become way more accessible in the past couple of years now that like markets are becoming

more available and now that online trading is getting more popular and i think like option traders make up like 25 of the daily options activity or something along those lines which is nuts so it's awesome that people are becoming more comfortable with risk and motivated to do their own investing but these are also like pretty complicated instruments and there are a lot of pitfalls that can be absolutely detrimental to even the most experienced options trader but you know especially new ones so like when i started self studying finance i found that a lot of the

resources were pretty complex they were pretty theoretical geared more towards academics or industry professionals and there seemed to be kind of a need for something that was a little bit more approachable a little bit more accessible more actionable especially something that was really specific for the retail market so the book was really our way of filling that void by taking a bunch of the content that the research team has been developing for the past like nine ten years and putting it into like a book form that's a little bit more condensed a little bit more

easy to read if that makes sense i think going through all that content yeah yeah no it was really easy to read you know uh actually in the in the first chapter in the in the the beginning of the book you start to you talk a little about you talk a lot about formulas and the the more theoretical part of options since you have a background in physics and mathematics right so that's what that's why you you you do the you put some some formulas and some some part of the options theory in there you

seem to like this kind of thing right yeah it's one of the so like the first chapter and i'll admit the first chapter is pretty dense depending on what your background is um the you know recommendation that i always give people is that like if you start with the math chapter and it's a little bit too dense or not really very intriguing or interesting like just skim it and then go through the rest of the book and then refer back to that first chapter whenever you need like a reference like oh i need to know

what the standard deviation is go back to that first chapter it's really like the math and we talk about this in the book the math is a means to the end like you know you need to understand some math i think to be able to trade options strategically but it's not really what you want to be focusing on when you're actually trying to develop strategies it's something that you kind of just want in the back of your mind to make sure that you're making strategic decisions whenever you put a position on or whenever you manage

a position um yeah so it's it's important for that math to be part of the foundation but a lot of these models are like very fundamentally incomplete they're useful for accessing risk and developing reliable strategies in most situations but they're incomplete nonetheless and so that's why it's important to have model free principles as part of your trading foundation in addition to having some of that math um just in the yeah in the back of your mind a little bit does that make sense yeah no no uh it's true it's a good idea to understand the

math to know how it works but actually if you know that all the concepts on options all you need is just basic mathematics right you need to exactly just the basics you can you can do well when you can be a successful trader yeah i mean like it's all it's all in there if that makes sense like everything is in there that you would probably ever really need to know at least at a superficial level but like there's a lot of options matt that even like tom doesn't know and he's been trading for years you

know decades so it's kind of it's there if you need it it's you know everything's in there but it's not um it's not the point of the book it's not supposed to be a math book it's supposed to be more actionable than that yeah oh julia so um volatility is a big part of your strategy and the the basic trade strategy and um you guys always use iv rank you know if you rank is just on the platform is highlighted on the platform but uh there's ivy person tied to there's the there's both actually um

there's there's which one do you prefer can you talk us a little bit about all those those merit those metrics which one is is the best for you and the difference between them yeah for sure that's a really good question actually it's one that we get quite a bit um so basically so you have iv rank and iv percentile and they both give you kind of like relative volatility metrics so like raw iv is not comparable between two different assets like if amazon's iv is 70 and spies iv is 40 it doesn't actually tell you

how high the volatility is you know relative to that history of the individual asset and so when you normalize something like when you normalize implied volatility to produce something like iv rank or iv percentile it gives you an idea of maybe how elevated that implied volatility is relative to its history and since options short options traders are trying to capitalize on that relative iv contraction that's really important to have some kind of metric there so just a little blurb about about those two and why we use them so ivr iv rank gives kind of a

better direct metric for evaluating the price of the option but iv percentile is more robust so they both work really well in giving that relative metric but ivp iv percentile is a little bit less sensitive to outlier iv moves so like if iv spikes 10 points up for a day and then goes back down that'll skew iv rank pretty significantly it'll skew iv percentile a little bit less it's generally less prone to skew when you're dealing with iv percentile um i tend to use iv rank just because we've actually researched those thresholds like we've done

pieces like what you know when we trade iv are over 30 like we actually have research to kind of like back up why we do that um so there's less research regarding iv percentile but both work really well for decision making i think that it's most important it's really important to note that like both metrics are prone to skew both can be relatively volatile and um even though like so ivy even though it doesn't it's not comparable between metrics it doesn't give you that kind of like relative measure that we need it does give you

a mo like the most direct representation for like how rich the premium of an option is so i think it's generally really important to use both so you want to use some kind of relative metric like ivr or ivp but you also want to look at the raw iv because that kind of tells you how much premium am i getting relative to the amount of risk that i'm taking for a specific instrument so i tend to use both does that answer your question yeah yeah no pretty much and then that's pretty much how i do

it too i always look at the iv and iv rank and i look at them both and um sometimes you you you may even find some distortions here some opportunity opportunities in the in this in this situations and um so let's talk a little bit about the this is this a very interesting interesting concept on the book that is the this loop period right you have the the the it's low it's how you see you see low right it's low we say lol but i know to me it's like we used to say here the

markets like it when you start a roller coaster and the roller coaster starts going up really slowly and then it goes down all of a sudden so this loop period will be pretty much like the start of a roller coaster and you start going up really the market goes up slowly and then goes down really fast i don't know it seems like a good way to to look at it so uh are there any research on how much is this how long this loop period takes because you may find a good trading opportunity there because

you may look like oh implied volatility it's been low for so long is over the the the the mean and then it might crash sometimes the crash might be coming soon is there any way to trade is there any research on these how long does it takes any any way you can you can trade this the the low period sure um so we actually tested this i think we did a market measure back in like march of uh march of 2020 so a while ago but i think we found in that study that the average

vix lull was maybe like 40 something days i think was like 42 days but the problem is when we're trying to use that as kind of like an indicator like we've recorded lulls that were only a few days and then we recorded those that were 96 days or even longer than that so even like the vix closed at like 18.5 a few days ago that's below its long-term average so now technically we would have been back in a lull period during that time and now it's back up to 24. so we can see that there's

a lot of variability in how long these periods had to last for and a big takeaway in the book is that it's really difficult and maybe even impossible to like consistently time the market so the fact is that these really big moves and these really big ball expansions that tend to kill short premium traders are usually the result of very impactful unexpected events um such as the pandemic or the russian invasion of ukraine um things that like people didn't really see coming that had a larger impact on the market than what investors were expecting so

um so for example like china went into lockdown about a month before the u.s and investors knew some that something was brewing but that uncertainty wasn't actually priced into the market until after our economy was already impacted and nobody was really expecting that to happen so timing events like this the really big ones i guess that can really be detrimental to a short premium trader they're you know because they're so specific to the current state of the market it's really really difficult to do that consistently so i would say that like we have data on

how long those low periods last but because we need to really focus on those kind of black swan events um as kind of like the primary risk factor that we should be considering um it's kind of i don't know if like looking at historical data of the vix period is really a good way to do that does that make sense yeah yeah no perfect perfect well the talking about those black swim events i was looking for i was looking at the the before the 2008 crisis and before the 2020 march of the meltdown from from

the cove crisis and uh volatility was trading really low before those periods just days before the those periods when volatility is really low the when the vix is really low you think it's a good idea just uh to not sell naked options just do define risk trades and uh or maybe if you when it's there's a fixed level you say no this big level is too low for me i'm not selling naked options or this fixes low or this vix level is too low for me i'm not even selling options here i'm i'll do something

else i'll just wait for the the volatility to expand uh there is it there's any level what you do in a really low volatility environment when obviously the the risk of a black swan or a big meltdown is higher right i think and that's that's a really good question because you're right like at least historically speaking it's difficult to make this claim generally but historically when we've tested this the risk of an outlier of all expansion tends to be highest when ivy is low and you know the best way to account for that risk is

really by limiting the amount of capital exposed in in the short in those low volatility conditions so so short options and when i say short options i'm referring to like 30 to 60 day contracts with deltas between 10 and 40 just because those are the ones that we've tested and those are included in the book but those positions are profitable in all volatility environments and in order to get that large number of occurrences uh to reach those positive long-term averages or at least to be more likely to reach them it's important to trade at all

bix levels even when the vix is really really low and like i said the most effective way to kind of like mitigate the risk of those expansion events when you're actually trading is by limiting the amount of capital and another thing that you said which is what i also do is that i like to trade like wide defined risk strategies in those volatility environments so i'll trade like wide iron condors or wide spreads when the vix is really low and i'm worried about mountain lion expansion so like a wide iron condor such as one that

has like short 16 delta strikes and long like six delta strikes it's basically a synthetic strangle so your pops are still high but your you know risk is defined for those really really large moves so that's kind of like what i tend to adopt so even though like you will take significant losses on that type of position it's not the same as having like a naked option or some kind of undefined risk strategy on so um yeah i think that's a great question yeah yeah no perfect perfect uh that's that's what i was thinking actually

and um in a big sell-off when the market crashes the market goes down a lot of volatility goes uh high uh what i do as a trader i i just go selling them the puts right i don't do much of the call sides because market recovers i understand that even the car gets gets richer gets more expensive when the volatility is high but i think it's a good idea just to sell puts and not doing the strain going volatility and when the the volatility is high when the market has already crashed another really good question

that's something that we get a lot of when um like viewers will ask that a lot when we get emails and stuff so um and my personal opinion on this is that like you don't know really the nature of the sell-off until you're already in it if that makes sense so like you could have a 2020 sell-off where you have this really rapid whip saw um and you know that lasts for like two months and then the market is basically recovered or you could have like a 2008 selloff which lasts for like two years um

so there's nothing wrong with trading directionally in those conditions there's absolutely nothing wrong with trading according to those directional assumptions and you know just selling the puts they're just selling the calls depending on where you think the market is going to go or taking the contrarian approach or moving with the market um but i think it's important that if you're trading directionally to have those kind of hedges you know directional hedges in the portfolio as well just in case the market turns against you so you want that element of diversification even when you're trading directionally

just in case you know you want that insurance right so um it's really like a personal thing there's nothing wrong with selling the puts when the market's tanking i think that's what a lot of people do and it works out but you just don't know like the nature of the sell-off until it's already done basically you're just kind of playing it day by day in those conditions yeah yeah yeah hey you look always to go a little more neutral right delta neutral when you're in your portfolio and even when the market goes down a lot

and the puts are you can sell out spy puts like i don't know 30 20 below the the price yeah you you go for more delta neutrals not delta neutral portfolio yeah so i tend to trade delta neutral just because like when i make directional assumptions they're usually wrong so i'd rather just avoid trying to factor in all of like the news and all these different like like whatever volume or factoring whatever factoring in other indicators i'd rather just go neutral and kind of let time and volatility do the work like the first trade i

ever placed ever at the beginning of 2020 was highly directional and it just so happened to work and i knew that was never going to happen again so yeah i'm trying a different approach now yeah what about the the buying power of your portfolio um maybe a traders could start using uh okay i'm gonna use 50 percent of my buying power here i put some trades on and using 50 all of a sudden the market uh suffers a large move and you're using more you're using i don't know 70 80 percent or even more of

your buying power you think it's a good idea just to manage that or say i need to re i need to reduce a little bit of that because probably you're gonna have to assume some losses right yeah that's that's a really tricky question it really depends on the person and the situation so and we write about this in the book like 50 is like the maximum you ever want to allocate to short premium just because if something like that does happen you want that poor you want that you know portfolio capital to cushion those potential

losses and you really want that reserve capital to be able to you know to be able to capitalize on those high volatility conditions where you have very rich premiums so it yeah it really depends on the person and the constraints of the market so like for instance in the last couple of weeks i had uh you know a bunch of positions or like even since 2020 i had a bunch of positions that would dip into the money and then i would just kind of wait it out to see if they would kind of bounce back

and that's what wound up happening um so in those conditions for instance like even though my buying power went up i didn't actually manage the positions and i just wanted to wait it out because of the duration of the contracts if you're dealing with that situation and you're dealing with like 10 dte contracts where the volatility of those positions are very high it might make more sense to sort of close those positions recent or take some losses and then try to capitalize on the volatility contraction that's a little bit more likely now that iv is

elevated um does that make sense it really depends on like how much risk you're willing to take given the current conditions yeah more so than you know um yeah does that answer your question yeah no the conditions change they change pretty much pretty rapidly and uh it's it's this environment is different from the other right and sometimes you you're in a position where you you have a lot of options that are closer to expiration you might just want to close those ones and and move a little bit and roll some positions even just by rolling

you might start using less capital much less capital right yeah exactly that's what i tend to do it's a lot of it depends on the duration of the contract because i really want to think like how efficient is it for my capital to be allocated to a certain position so like for instance if i have a position on and even if it's profitable and there's only like 10 days till expiration then is my capital more you know is it being used more efficiently in terms of profit generation to close that existing position add it to

a new position instead of trying to get as much extrinsic out of the first position as possible like that's generally that's part of why we manage it 21 days when we look at the mechanics it's because usually because your profits are generated so heavily during the first half of the trade that you you know it's generally more efficient to allocate to new positions or to roll or to recenter existing positions that's like generally the it's generally the stance that i tend to take but in terms of managing losses for me it really depends on how

big those losses are so like we've tested this for instance uh on the network uh you know once a position tends to lose about like 2x the initial capital or 2x the initial credit that's when like the probability of a turnaround starts to drop off pretty significantly so and you can solve that with stop losses for instance but if it's a more moderate loss because p l swings are so volatile with short options positions a lot of the time at least for me it makes more sense to just kind of hold the position and try

to let it recover um but it is really a personal choice it really depends on how much risk you're willing to take and how efficiently you think your capital is being used um when it's tying up a specific position and ball is just expanded yeah yeah perfect julia perfect great and now you follow those mechanics strictly uh i talked to to jim actually a few weeks ago and uh he followed some time so sometimes he just do his own way you follow those 45-21 rolling and 50 closing the position at 50 profit you follow those

strictly not not really i mean i do you know there's a lot of there are aspects of the mechanics that i really agree with so for instance if you're trading for premium sticking between 10 and 40 delta i think that totally makes sense um you know you want to state liquidity is like the most important one that i follow very strictly um but in terms of like management i really try to i tend to manage at credit thresholds rather than rather than durations so for instance like if i have and this happened with a position

recently if i have an xle position on like for me at least those those positions didn't start actually generating profit until we passed halfway through the trade so i'll just leave the position on pass 21d to e just to see if i can get any extrinsic out of it as opposed to looking for a new position and that might be a better use of capital depending on the volatility of the market so if the vix is low does it make more sense to get more extrinsic out of a certain position or to put on capital

to a new potentially lower iv position um and yeah i don't know i generally trade mechanically but not always it really depends on you got to use your gut i guess thing for a lot of this trading depending on like where you think whether you think the position is going to recover um whether you think that you're going to extract a certain amount of capital out of an existing position um i and then with rowling that's something i tend to not really follow just because like i don't when a lot of people consider like when

you roll a position you're trying to get a certain amount of capital back for a loss of the position that you've already had on and that's not really how i see it i see it as a totally new position so for instance like if i take a position to manage at a loss and then i'm considering rolling or like putting the same position on again and letting that go for another duration cycle um i would only do that if i would place that trade again totally on its own does that make sense so like rolling

is something the rolling mechanics are something i don't really follow just because i see trades as sort of like individual entities if that makes sense yeah no no perfect perfect i guess that the mechanics are a good guideline it has a good advantage that is you take the emotions up off the the the game a little bit you know you know this is what this is something that works i should be doing and you don't have to make too much too many decisions and you remove the emotions a little bit when you're in that situation

actually right exactly and you bring up a really good point like it's important to trade mechanically it's important to have like a consistent strategy when you're actually trying to develop a portfolio and have certain expectations around your profits and losses but like our mechanics are not necessarily the best mechanics for an individual trader so like they might have their own sets of mechanics that are like you know variations of the mechanics that we use like me and jim and whatever but it's important to have that consistency either way so like whether it's our mechanics or

your own mechanics or some modified mechanics like it's important to have some kind of structure in place just because otherwise you can't really get any sort of reliability or ex like to fit like you know more definite expectations around future performance and that's something that we really try to aim for uh when we trade right yeah yeah people are different people are different some people know people are some people have more much more tolerance to risk than others i think this is the main difference between the traders and the risk tolerance from from uh the

the difference between at risk risk tolerance from one trader to to another and uh what about uh here in brazil we have one etf that has liquidity options only one etf and uh you have a lot in in usa so when volatility is high i think it's a smart thing just to trade etfs just i mean well spy is uh when spy is at 30 i don't know over 30 and say oh okay i just want to trade spy in these situations or i'm just going to use some etfs i think it's a it says

mark is a smart thing just to trade etfs and not individual stocks you talk you actually answered that question on the book but since most of our viewers haven't read the book so it would be good if you to talk a little bit about that for sure and that's a really good question um i so you're right that like um so for etfs like high volatility conditions don't come around that often so like when spy hasn't you know on iv or above 30 like that's a relatively rare occurrence even though it's happened a lot over

the last you know two years so etfs because they're diversified because they're a little bit more stable and less sensitive to like company and sector specific factors a lot of the time like that's what i generally tend to trade when those ivs are high so when you know like there's rich premium that's you know that's when i would prefer to trade etfs if i have the option i generally try to stay away from single stocks because you have events like gme because you have like the facebook earnings event from a few months ago you have

like the tesla rally of 2020 and you have like those single company those idiosyncratic risk factors which is what we call them can be really detrimental to like an over exposed short options trader so generally i try not to trade them if i can but because it's so important to have that high iv and that you know rich premium and because that doesn't happen very often with etfs like a lot of the times stocks are more suitable um you know just you know to capitalize on that richer premium so the what i normally do is

like i generally stay away from earnings trade so if i'm going to you know trade single company stocks i generally want to be pretty far out from earnings and if i do make an earnings play it's a really really small position just because of how wild those moves can be and because how infrequently they happen we don't actually know whether they're profitable in the long term or not we can't make that claim because there's too much uncertainty with having so few occurrences so i generally stay away from earnings trades and it's mostly if like there

are no really you know suitable etfs to trade that's when i'll trade single companies but you also like almost entirely trade defined risk if i'm going to be doing that i'll either do vertical spreads or iron condors so that's kind of like how i tend to my my own personal mechanics i guess let's talk a little bit more about your personal trading style julia so you you you like the strangles you do the strangles a lot and uh which delta which delta do you you look for selling for the short option when you're doing a

strategy you know in a normal environment i know that changes with volatility instead of in a normal environment what what do you why you do what kind of trades you do what kind of delta do you use talk us a little bit about how you like to trade oh for sure that's the really good question too because you know everybody's different um and i do tend to do delta neutral strategies so either iron condors or strangles i'll do spreads if i need to like you know center the portfolio delta a little bit like maybe i

need a little bit of long or short delta so i'll throw a spread in if i need to if i need to balance it out um but generally the limiting factor is the um is the buying power reduction of the trade so for instance if it's like a 50 underlying and you know i only need a few hundred dollars in buying power i'll do a strangle or i would prefer to do that as much as possible but for instance if i'm trying to get exposure to spy or the cues and maybe that position is too

buying power heavy with the strangle then i would do an iron condor just to reduce the buying power of the trade because that's really the biggest limiting factor which is like the the capital concentration of the position when you're deciding whether to put something on it doesn't matter like if you have a certain assumption or if you really want to trade to find your undefined risk you really want to get a certain pop like if the buying power is too high that is not a good trade um relative to your portfolio capital right so generally

you want your portfolio or your position sizes to be like five to seven percent per position you don't want kind of more than that in a certain in a single underlying or a single trade you can kind of like uh tweak that rule a little bit if it's a very small account it's like a ten thousand dollar account then you can't really trade anything you know any short premium strategies if you're only doing five to seven percent so you can there's some wiggle room with regards to that but um generally speaking i'll try to do

like wider strangles or maybe like depends on the buying power a little bit if it only takes a few hundred then i'll do like i don't know 16 to 20 delta a little more on the conservative side and then um i try to do if i do an iron condor in a stock or a more expensive underlying i'll try to do it as wide as possible so you know ideally it would be about six delta for those long wings but if it's too buying power intensive to go that far out it'll usually be like 10

delta for a 16 delta short strike um does that make sense yeah yeah yeah okay this will end up being like what how wide is that like ten dollars wide in the iron condor yeah it's i think i'm the only person on the show who it's that's the wing length according to delta just because like a lot of underlines are skewed like oldest skewed spots yeah no i do that i do that you a lot yeah so i think it works out to be like 10 to 15 but it's asymmetric so it might be seven

dollars on one side you know 15 on the other side i think it works out to be like 10 but i generally like to scale the wings to the expected range of the underlying just because like you know if you're going by a fixed dollar amount then you might be like eating into premium that you could be you know getting on one side so i'd rather have it be a little bit more efficient with regards to pricing as opposed to using a fixed dollar amount um and you know not all underlines have skew i think

apple at least historically was relatively skewless um so usually the dollar amount works but like for certain underlines like that's kind of how i like to trade um so i'd say that's yeah between like i don't know 10 and 15 a lot of the times yeah yeah what about the management uh the trade management you you you have a a rule to true the untested site you do that you wrote the untested side when you you your strikes get breached or when your break even gets hit how how you do that you do you do

those those many mechanics you you just assume losses how you do that i generally yeah that's a good question so i generally put in stop losses but they're really far out so if i do like a 2x stop loss like two times the initial credit stop loss for an undefined risk strategy that usually works out pretty well um because usually like yeah if you're taking like a 5.5 x or a one x loss a lot of the time the underlying price will bounce back into the expected range and so i'm just kind of like willing

to take that tail risk and go out as far as 2x and then um like i said earlier like i don't really roll in the traditional way like if a position has urban underlying has the characteristics that i'm interested in when i'm reconsidering putting on the trade then i'll put it on again so i won't necessarily like i'll usually re-center it entirely as opposed to rolling the untested side out or something like that um so that's what i tend to do and then for undefined risk positions i usually don't manage them at all so just

because like because you know what the risk is prior to going into position you know and because like the buying power reduction you know it gives you that max loss because you know what it is prior to going into the position i'll just usually let it expire with a loss or give it enough time to recover or give it as much time to recover as possible so that's what i personally tend to do but everybody's different it really depends on your um on your personal preferences yeah yeah well great julia that that was pretty much

it it was a great interview and um here's the book again if you want to buy it you can go to amazon right you can download it you're selling on amazon you can download to your mobile device and here's then here there is a lot of uh a lot of ideas for you to improve your trading style if you like to selling options this is pretty much focused on selling options in brazil not a lot of people talk about selling options and there's a lot of training material talking about buying options here people just do

a technical analysis and try to buy the the far out of the money option and they'll hit the lottery this kind of thing and uh we're trying to change people's minds here with uh and uh julius pina is uh is that good people for you to follow if you want to leave your social media social networks twitter instagram julia just just just say it oh so my twitter is finance photon f-i-n-a-n-c-e p-h-o-t-o-n and i'll i'll spell it out for you so that you can put it in the description or something but you know we have

trade ideas that we put on the show and i'll post about them sometimes and um yeah thank you for having me on i had a great time talking with you i hope it was helpful for your viewers and yeah books on amazon we're happy to send out any other information if you guys have any questions okay great julia thank you thanks a lot and have a great day and maybe we can do we can chat again sometime that sounds great thank you thank you bye-bye