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.
And 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. And I only see one way to prove credibility and that is to share their P&L.
Not only share P&L, but also share the account P&L volatility. Which means how much did the account value move up and down. If your account made 20% 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 that is why I share my P&L and show my daily moves of my P&L. Now, I would not buy a course from a Youtube instructor 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 December 2021. I’m going to share my real P&L for the month of December 2021 for my two separate accounts. And before I get into the P&L, I want to briefly go over what the market did in December. This will give you an idea of what my trading systems had to contend with over the last month.
Now my question always is what type of market was December? In my book I go over the four market types for premium selling options traders. And that is what my two separate systems are set out 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: #1, the bull market; #2, the sideways market; #3, the grind-down market; and #4, the crash market.
So let’s get into what the market did in December 2021. Okay, what type of market was December 2021? Of course, we’re looking at the $SPX which represents the S&P 500. We started out here at the end of the month, and overall you can see it was pretty bullish up about 4.36%. There’s a lot of, not a lot, but there was quite a bit of volatility; ups and downs coming through here. But overall, you know, that’s a bull market.
Let’s see how the volatility did during the same time frame. So we started here. Early in the month. Looks like we got a good little pop into volatility all the way up to 36. That little pop right there would have, you know, hurt a lot of premium option premium sellers that weren’t hedged properly. But then the volatility looked–came down–popped back up again; kind of scared a few people maybe and then just fizzled down.
So as a premium seller if you were to sell here and then buy back you may get money, but if you’re sell here and try to buy it back here you’re going to lose. So there’s a lot of ups and downs in terms of volatility in December. But overall, even with a volatility kind of popping up and down and back up and back down again, it was a bull market.
Next, I’ll get into the P&L first from my smaller account where I trade the 5 Step Options trading success program. This system is proprietary and took me over three years to develop as I kept racking my brain trying to replicate what I was doing on 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 outperforms the S&P 500 with lower P&L volatility.
Now, I make these claims based on the last 10 years back-test results along with 20 months of trading it live. Even though it does not replicate the exact system I’m using in my larger account, it is 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.
So here are the results for my 5 Step. Okay, looking at the results for the 5 Step for the month of December of 2021. We started with $14,577 and ended with $14,893. So this is pretty accurate here. You can see the volatility and you can’t have a little bit of a bump. This could be to a bad tick because usually this system doesn’t really move around too much. But this looks pretty normal here. Not really much going on I’m just kind of working our way up a little bit. The adjustments on this; I did one adjustment on the 6th and one adjustment on the 29th. So I did two adjustments for this and that takes me about 15 minutes to do adjustments on this account. Mainly because I usually I’ll make a video of it and then I’ll send it into my private group so they can see my trade. That’s what takes longer or the longest, but actually trading it, you know, probably takes a little less than that.
Okay, let’s do a little math here. $14,893 minus $14,577 equals a profit of $316. Let’s divide that by the amount we started with, $14,577 and we get a 2.17% return for the month. So that’s good, really good. 2.17% for the 5 Step for the month of December 2021. And I always like to double verify. Here’s my 5 Step account. You can see the time. It’s January first. It’s a saturday, and you can see the account NetLiq. $14,893.
As I have stated before, the edge in selling option premium is because implied volatility is higher than actual volatility, and that happens about 83% of the time. The system is designed to make money in any market environment while mitigating drawdowns. In the last 20 months while trading the system, my highest drawdown was around 2.27%. This is almost like a super high yielding savings account. The system is scalable if you want to take more risk. This means I could have doubled these numbers.
So if I had a higher risk tolerance over the last 10 years, I could have made an average of around 24%-25% with the max drawdown of around 4.5%. And this would be allocating $4,000 per tranche. And I would not increase the risk using the system allocating less than $4,000 per tranche. You can learn exactly how I trade in this account by purchasing the course. And I put a link in the description below.
Now, I’m going to go over my larger account where I trade my Synthetic Dragon system. And I got the name from Chris Cole’s portfolio, The Dragon Portfolio, which was put together in order to produce positive returns in any and all market environments. The Synthetic Dragon uses options in a synthetic manner. It lowers risk and it’s been back-tested and forward-tested and has at least 10 times more occurrences versus Chris Cole’s Dragon Portfolio. And this system has created excellent results in a live account in all four market environments.
If you’re interested in the back-tested results for the Synthetic Dragon portfolio, I 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, next I’m going to go over my take on what happened in the month of December 2021. And it had a pop in the VIX to around 35, then back down to 18, then it popped again to over 27 before fading back to 17. And for option premium sellers this is quite a ride; especially, for premium sellers that are directional.
You may have never heard me mention this, but there are premium sellers that are directional. And this volatility whipsaw is very troublesome and those types of traders typically lose money in this environment or the environment we just had in December.
Now for the 5 Step and the Synthetic Dragon, it was a relatively smooth easy ride to profitability. Now, the keys to having a trade structure and a trade plan in place that takes advantage of the premium seller’s edge and is proactively hedged. And also those portfolios are managed in less than 15 minutes a week. And when you have something like that I believe it’s a good system.
Now, I understand people trade to make money, but what good is the money without the time to go with it. And this is why I’m baffled when I see people spending their time learning how to day trade which puts them in front of a computer stressed out all day. Not to mention day trading is unproven. Would it be more prudent to learn a system that create both time and money? The two systems I share focused on creating time not just money. And 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 December 2021. Here are the results for December for the Synthetic Dragon, and we can see a little bit of volatility but not really a significant amount. We started with $175,225 in the beginning of the month, and we ended with $182,800. And you can see it wasn’t much volatility really. And we just kind of slowly rose higher as the month went on.
Now I did make 3 adjustments. I made 1 in the beginning of the month on the third; then one in the middle on the 17th; and then right at the end of the month–the last day–on the 31st. I made an adjustment. So I made 3 adjustments on this portfolio. And each took probably about 15 minutes. So, you know, I probably spent 45 minutes on this portfolio.
Let’s do a little bit of math. Okay, so we ended with $182,800; started with $175,225. So I made $7,575 this month;on a percentage basis. I’ll divide that by $175,225; 4.3% return. That’s a really good month. It’s not out of the realm of what I do on a monthly basis, but I’ll take that. That’s a really good month for the Synthetic Dragon portfolio. And here’s the double verification of the P&L for my Synthetic Dragon. You can see the time and date here. And the NetLiq. $182,800.
If you want insight on how I trade the Synthetic Dragon portfolio, you can purchase my book A Portfolio for all Markets. Or you can check out the course that I took that brought my options trading to another level from Ron Bertino, and it’s called Trading Dominion. And he has a few courses so look for the PMTT course. And if you decide to take the course and use my affiliate link when you complete the course, you’ll be given the opportunity to join the Mastermind Group.
If you join, just direct message me within the group and I’ll send you to an archive trade plan that’s almost identical to the Synthetic Dragon. Now, I’ve left a link in the description for my book; for my review of Ron Bertino’s course; and an affiliate link to Ron’s course. And if you have a smaller account, I recommend my 5 Step Course. And you can see the link in the description for the 5 Step.