Video Transcript: This is my Real P&L for JULY 2021
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. And I see only one way to prove credibility and that is to share P/L. Not only share P/L, but also share account P/L volatility. Which means how much did the account value move up or down. If your account made 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 real 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 July 2021. I’m going to share my real P/L for the month of July 2021 for two separate accounts and before I get into the P/L I want to briefly go over what the market did in July. This will give an idea of what my trading systems had to contend with over the last month; and my question always is: what type of market was July.
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 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: #1, the rising bull; #2, sideways market; #3, grind down market; and #4, the crash market. Let’s take a look at what the market did in July of 2021.
Okay well how did the market do over July of 2021. We’ll end here–let’s see, at 6:30–and you can see that the end result was that it was up 2.24%. This is the S&P 500 of course, and you can see that we had some volatility, though a little volatility here kind of in the middle of the month, and this volatility will happen a lot of times–it’ll hurt option premium sellers. Let’s take a look at the volatility because you always want to look at the volatility because that really tells the story about–you know–how much do options actually cost. And this the volatility really affects the price of options so you want to keep track of volatility and what happened. So we see here we go to this day here. You can see that the VIX spiked all the way up to 25 and then ended at 18.2. So actually the volatility or the price of options has actually increased over the time frame in July. So that means if you’re selling (a premium seller) you might be down for this month.
And if we go back to–you know–what type of month was this; it was sideways for a while but then it ended up over two percent so i’m going to call this a bull market but it had an increase in volatility. So as far as a premium seller it’s kind of a mixture. You know the bull market–you usually have volatility go down and that’s good, but you actually had that mixture of the bulk of the market went up bull market with the volatility increase. So it’s kind of a mixture type market, but overall I would call it a bull market.
Next I’ll get into the P/L. And first in my smaller account (where I trade the Five 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 in my larger portfolio margin account. I wanted to replicate this system in a regular margin account. 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 S7P 500 with lower P/L volatility. And I make these claims based on the last 10 years of back-tested results along with about 15 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 Five Step Options Trading Success Program, is not dependent on picking a direction so an unpredictable market does not have a negative effect on the system. And a side note over the last week and a half, I have tried to improve the system and I have spent over 40 hours of back-tests and over 3,500 back-tests to try to improve the system. And the tweaks that I’ve made just don’t improve the system–it’s just solid the way it is.
So here are the results for my Five Step account. Okay here are the results for the Five Step Options Trading Success Program for the month of July 2021 and you can see that the account value is $14,640 and there wasn’t too much volatility. You could kind of see–when that volatility increased in the middle of the month–you can see that that kind of put a little bit of a downtick on this, but again–you know–not a lot of volatility in the account. Of course–you know–it was down $200 at one point it was maybe up $500 or something like that. So this account started out last month at $14,877 so you can see that it actually was up (here’s the $15,000 so it was up for a while) and then it actually was down around $300 and you can see that there wasn’t really a lot of volatility in the account.
Let’s go ahead and do a calculation here. So we started with $14,877 and ended with $14,640. So down $237 divide that by what we started with, $14,877, and we’re down about 1.6% or 1.59%. So we did underperform this month with the market up about 2.3%.
And here’s my ThinkorSwim account. I just wanted to show the P/L. The netliq. $14,640 and sometimes I like to do this just to prove that–you know–you can see my P/L in more than one place. Now as I stated before the edge to 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 14 months while trading the system my highest drawdown was only 2.27% and this is almost like a super high yielding savings account. Also the system is scalable. If you want to take on more risk you can. This means you can double these numbers. If I had a higher risk tolerance over the last 10 years I could have had an average return of 25.72% (with a maximum drawdown of around 9%). And this would be allocating $4,000 per tranche. I would not increase the risk using this system allocated to less than $4,000 per tranche and I currently just up my risk by 50% and I’m using $6,000 per tranche. This means based on back-tests I could see a 6%-7% max drawdown for around a 19% return based on back-tests again. 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 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. It has been back-tested and forward-tested to produce good results in all four market types.
Just a side note, this is the system I will use in my future hedge fund; only for accredited investors. I will have a one million dollar minimum buy-in and I will max out at 10 million dollars,initially; and then I’ll make sure that it’s scalable before taking on more money. And i will have a 2 and 20 fee structure and will use SMAs. Which means I will never have custody or possession of a client’s funds. And the name of my company is Clovis Wealth Partners. Just a disclaimer, I’m not taking on any clients yet and the back-test results that you’re going to look at currently do not include the fees.
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.
And now my brief market view. I’ve noticed that buying the dip has worked very well over the last year or so, and I just think this works until it doesn’t. And when the market turns down and does not come back up for 10 years (like it has four out of the last 10 decades adjusted for inflation of course) then the buy the dip strategists are going to get hurt really bad. But again, my market bias is not important as my system does not rely on direction. And this is why I highly recommend learning about options and adding another dimension that can create an edge.
Now here are the results for my Synthetic Dragon Portfolio for July 2021. Okay so how did the Synthetic Dragon do in July of 2021? You can see the volatility in the account. Remember when we had that volatility in the middle of the month? You can see that we had a little bit of a drawdown here. We started at $161,000 went to $158,000 so around a $3,000 draw down; not really significant with a $160,000 account; less than the actual market. And then we had the slow-nice grind up here. So really not a lot of volatility in the account. Started with $161,497 ended with $165,749 so let’s do a little bit of math there. $165,749 minus $161,497 so made about $4,252 would divide that by what we started with $161,497 and we had a 2.63% increase which does outperform the S&P along with a lot lower volatility than the S&P. So we had another really good month with the Synthetic Dragon Portfolio. Here’s my ThinkorSwim account. How’s my account balance–you know–time stamped. $165,749. Sometimes I can’t do this because I have to time it perfectly. So it is the end of the month and it’s a Saturday I can kind of double verify and show you my P/L. Don’t worry about this partially delayed data. I know some people have commented on that. That’s not a problem. I don’t have delayed data when it comes to SPX and that’s all I trade in this account. but there you have–you know–kind of a double proof of the P/L in the account.
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 a course that I took that brought my options trading to another level from Ron Bertino and it’s called Trading Dominion. And I left a link in the description for my book, for my review on Ron Bertino’s course, and for the Five Step course. Now also I’ve created an options course for beginners called Options from Day One and it’s free and just see the link in the description below.
Link to my Book: https://bit.ly/aPortfolioForAllMarkets
Link to Ron Bertino’s Course: https://bit.ly/TradingDominion
Link to Ron Bertino’s Course REVIEW: https://youtu.be/z4JLjZFS04w
Link to Synthetic Dragon Portfolio Video: https://youtu.be/YrvGdyNx-2Y
Link to Five Step Options Trading Success Program: https://rkdllc.thrivecart.com/5-step-…