Hey stock and options traders, welcome back to the channel. If this is your first time here my name is Karl, Karl with a ‘K’, and I’ve been trading stocks and options online since the mid-1990s. If you’re here to learn about trading or to figure out if a stock or options course on Youtube is worth the money, then make sure to subscribe to the channel.
One of my goals is to change this industry. I want to change the buying criteria. When anyone wants to buy a stock or options course on Youtube. If promises are made by a Youtube instructor when selling a course then I believe they should prove their credibility. I see only one way to prove credibility and that is to share P&L. Not only share P&L, but also share the account P&L volatility. Which means how much did the account value go up and down.
If an account made a 20% return but it was down 60% at one point, then the 20% return is not a good return on risk. Sharing the P&L volatility is important because risk adjusted returns are the truth. And this is why I share my P&L and I show my daily moves of my P&L. Now, I would not buy a course from a Youtuber that makes promises without sharing their P&L and I hope you won’t either. In this video, I’m going to go over my real P&L for the month of August 2021.
I’m going to share my real P&L for the month of August 2021 for my two separate accounts. And before I get into the P&L, I want to briefly go over what kind of market was August. This will give an idea of what my trading systems had to contend with over the last month. My question always is: what type of market was August?
In my book, I go over the four types of markets for premium selling options traders. And that is what my two separate systems are set up to do. They’re set up to take advantage of the difference between implied volatility and actual volatility by selling option premium.
Now, the four market types are number: #1, the rising bull; #2, the sideways market; #3, the grind-down market; and #4, the crash market. So let me go over what the market did in August.
Okay, looking at what the market did in August of 2021. We’ll use the S&P 500, the $SPX, as our proxy, you know, the S&P 500. We ended the month here 7/30 and yesterday was the end of the month, and we’re up about 2.89%. As you can see, it wasn’t–we didn’t go straight up. I did have this pullback here. I wouldn’t call it a major pullback, but uh we did go up–let’s see what kind of volatility we had–because volatility is always used as a measure of the price of options and it’s always important to factor that in to see what happened over the month.
So let’s take a look at that. So we’ve got two right about here. You see we had a spike up to about 35% spike up to about 24 (24.50), but we ended up down overall. And typically what will happen is with an option premium seller you might have taken a hit there but if you were able to hold on you probably did pretty well this month in terms of selling premium and buying it back. But with the market up over 2.5%, I’m going to call this particular market for this month a bull market.
Next, I’ll get into the P&L. The first in my smaller account where I trade the 5-Step Options Trading Success Program. This is a proprietary system that took me over three years to develop as I kept racking my brain trying to replicate what I was doing in my larger portfolio margin account. I wanted to replicate this system in a regular margin account and I back tested over 300 different trade plans until I finally came up with a successful system that I could trade in a smaller account that could outperform the S&P with lower volatility. And I make these claims based on the last 10 years back-tested results along with about 16 months of trading it live.
Now even though it does not replicate the exact system I’m using in my larger account, it is as about as close as you can get. My small account portfolio using the 5-Step Options Trading Success Program is not dependent on picking a direction. So an unpredictable market does not have a negative effect on the trading system.
Here’s my P&L for the 5-Step account. Okay, let’s get into how the 5 Step did in August of 2021. You can see we started with about $14,640 dollars. That’s based on last month’s P&L. The lowest point was around $14,400 so we’re down about $300 and around the 2% swing in terms of drawdown but there’s not a lot of drawdowns. You can see it’s pretty smooth equity curve and we ended up with about $14,971at the end of the month.
So let’s do a little bit of math. So if we ended up with $14,971 and we started with $14,640. We ended with $331 divided by $14,640. We ended up about 2.26%. So that’s a good month, 2.26%, very good for the 5-Step. Here is a double verification of my P&L using my 5-Step course. You can see it’s August 31st, 1422h; markets are closed; NetLiq. $14,971.
Now, as I have stated before, the edge in selling option premium is because implied volatility is higher than actual volatility about 83% of the time. The system is designed to make money in any market environment while mitigating drawdowns. In the last 16 months while trading this system live, my highest drawdown has only been 2.27% and this is almost like a super high yielding savings account.
And also this system is scalable. If I wanted to take more risks I could. This means I can double these numbers. If I had a higher risk tolerance over the last 10 years I could have had an average return of over 25% with a maximum drawdown of around 5%. And this would be allocating $4,000 per tranche and it would not increase the risk using this system allocating less than $4,000 per tranche. Now again, you can learn exactly how I trade this system by purchasing the course. And I put a link in the description below.
Now, I will go over my larger account where I trade my Synthetic Dragon system. And I got the name from Chris Cole’s Dragon Portfolio. The Dragon portfolio was put together in order to produce positive returns in any and all market environments. The Synthetic Dragon uses options in a synthetic manner and has been back-tested and forward-tested to produce good results in all four market environments.
And side note, this is a system I will be using in my future hedge fund for accredited investors. It’ll have a $1,000,000 minimum and I will max out around $10,000,000 just to make sure that it’s scalable before taking on more money. And I’ll have a two and twenty fee structure. And I will use SMAs. Which means I will never have custody or possession of my clients funds. And the name of my company is Clovis Wealth Partners. Now, if you’re interested in the back-test results for the Synthetic Dragon Portfolio, I’ll put a link in the description for the results starting in 2008.
This account has portfolio margin allowing me to trade with more leverage in order to take advantage of a certain trade structure. Now let me go over my brief market view. You would have done well just holding the S&P this month, but what will you do when the market crashes again, like in 2020? Will you just continue to hold and hope? Will you just hope that it’ll go back up like it did after the 2020 crash? Or will it be down for a full decade like it was from the year 2000 to 2010?
I’m personally more interested in having a portfolio that can still make money when the market crashes or goes down and make money when the market rises. This is why I have a majority of my net worth in a Synthetic Dragon portfolio. Now this is why I highly recommend learning about options and adding another dimension that can create a real edge.
Now here are the results for my Synthetic Dragon portfolio for the month of August 2021. Okay, let’s see how the Synthetic Dragon did for August 2021. We started with $165,749, and sometimes this isn’t exactly perfect here, but so our drawdowns were down to $162,447. So about a $3,000 drawdown during this time frame. And, you know, it’s a 1.5% to 2% drawdown; not a big deal. We ended up with $163,805 so actually we’re down a little bit.
So let’s do a little bit of math. So we started with $165,749 and we went to $163,805. Down about $1,944; down a couple thousand dollars. So let’s see what that is. Divide [$1,944] by $165,749. Okay, we’re down about 1.17%. Yeah, we’re just down just a little bit but not a big deal. You’re gonna have those months where you’re not always going to be up every month but when you get the overall returns you’re going to be doing very well and you’re going to be hedged if there’s a crash.
Okay, here’s uh my Synthetic Dragon TOS account, my real P&L. I just wanted to show you that it’s August 31st. The markets are closed. $163,805. Just a double verification.
If you want insight on how I trade the Synthetic Dragon portfolio, you can purchase my book called A Portfolio for all Markets or you can check out the course that I took that brought my options trading to another level, and it’s from Ron Bertino called Trading Dominion.
And I’ve left a link in the description for my book, for a review of Ron’s course, and an affiliate link to Ron’s course. Now, if you decide to take the course, and use my affiliate link when you complete the course, you will be given the opportunity to join the Mastermind Group. If you join, just direct message me within the group and I will send you an archived trade almost identical to the Synthetic Dragon.
Now, another option would be taking my 5 Step course. And this is more for people that don’t really know too much about options and want to learn how to better apply options in a practical manner. See the link in the description for my 5 Step course. Now also, if you’re brand new to options, I’ve created a beginner’s options course for free and it’s called Options From Day One and there’s a link in the description for that course as well.
LINKS MENTIONED:
Link to 5 Step Proprietary Course
Link to my FREE Proprietary 2060 Trading Course
Lin to my Free Beginners Option Course
Link to Ron Bertino’s Course REVIEW
Link to the Synthetic Dragon Portfolio Video
