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 move up and down.
If your 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 real truth. And this is why I share my P&L and I also show my daily moves in my P&L. Unless I was doing a review, 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 March 2021.
I’m going to share my real P&L for the month of March 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 March. And 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 March?
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.
Okay, let’s take a look at the market here for March. Let’s see we started here and we ended here. So it looks like we went up about 4.17%. It was a little bit choppy on the way there, but I would call this up trending market., so I’d call this a bull market for the month of March.
Now, I’ll take a look at what volatility did. Volatility is a key element when assessing an options portfolio, because volatility has a direct impact on the price of options. And the way I like to check volatility is by tracking the VIX. So let’s take a look at the VIX for March. Now, as far as volatility look, as far as looking at the VIX for the month of March, let’s see here. sSo volatility started here at the end of the month and went down. I mean it’s just a straight down volatility. Basically, I wouldn’t say collapse but it went down significantly. If you’re an options premium seller you probably had a good month if you were using the S&P, because you
had some drop in volatility so you would have sold some options over here and then you would have bought them back for cheaper down here.
Next, I will get into the P&L first in my smaller account where I trade the 5 Step Options Trading Success Program. And this is a proprietary system and it took me over three years to develop as I kept cracking 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 come up with a successful system that I could trade in a smaller account that outperforms the S&P 500 with lower P&L volatility.
And I make these claims based on the last 10 years back-tested results along with about 11 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.
One thing I’d like to point out are the back-test results since 2011. You can see I’m slightly down this year. You can also see that 2018 was pretty much a break-even year. And the point I’m making is that you don’t know what kind of market is coming in the future. Maybe 2021 might be another 2011 with a 43% return, or maybe a 2012 with a 30% return. And I believe these types of results are coming up somewhere in the future. And these returns were achieved with a maximum monthly drawdown of 2.27%. Even if the system only does 8% this year, you know, like it did last year with a 3.04% max drawdown that’s a great return on risk; and remember, you can always double up your risk and achieve two times the returns. So we’ll see what the future holds.
Okay, let’s look at the performance for the 5 Step for March 2021. We started with $15,215. That’s the number that I used last, at the end of last month. And we ended the month at $14,870, down $345. You can see we didn’t have a lot of volatility, you know, I had a higher P&L. I actually took a loss, actually, for the first time in 11 months. I actually closed out a trade for a loss and so it knocked this down here; but after that happened, you don’t see a lot of volatility in the trade.
Now, let’s do a little bit of math. If I started with–I started with $15,215. I lost $345, so $345 / $15,215 =2.7%. That’s 2.26% or 2.27% down for the month. Well, one of the things I want to point out is I was mitigating risk when I exited this particular position. And so, you know, when you mitigate risk sometimes you take a little bit of a loss. You can see I’m down 2.27% for the month of March.
As I’ve 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 11 months while trading the system live, my highest drawdown was only 3.04% and this is almost like a super high yielding savings account.
This system is scalable. If you want to take on more risk you can. And this means you can double the numbers. So 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 monthly drawdown of 6.08%. Now, this would be allocating $4,000 per tranche. I would not recommend increasing the risk using this system allocating less than $4,000 per tranche. Now, I currently use the conservative lower risk approach of applying $8,000 per tranche. Again, you can learn exactly how I trade this account by purchasing the course I put the link in the description below.
Now, I will go over my larger account. I recently put a video out showing the back-test and forward-test of this account. And I’ve recently named this account strategy The Synthetic Dragon Portfolio. I will put a link in the description of the Synthetic Dragon Portfolio video if you are interested in seeing the account results since 2008. This account has portfolio margin allowing me to take advantage of a certain trade structure.
Now, first I will briefly go over my market view. And the NASDAQ’s high flyers or growth stocks have been struggling over the last couple months due to rising bond yields while the S&P is hitting all-time highs. Now these fundamental aspects don’t have any effect on how I open or manage The Synthetic Dragon Portfolio. The rules are black and white. The trade plan is non-directional.
Now while January was my first drawdown in almost a year, February was excellent at 9.69% return, and this month was also very good. So looking at my Synthetic Dragon Portfolio for the month of March 2021, we can see that the first thing that comes to my eye, you know, up 4.23%. That’s an excellent month; almost $160,000 on the account. If you recall, I started with $110,000 when I started my Youtube channel back in the mid to late 2019.
You can also see the volatility. I started with about $154,000, never went below that $154,000; just kind of kept kind of slightly higher, slightly higher, moving my way higher up to this close to $158,000.
So there you have it for The Synthetic Dragon Portfolio for the month of March 2021. 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 I took that brought my options trading to another level from Ron Bertino called Trading Dominion. I’ve left a link in the description for my book; also of a review of Ron Bertino’s course; also a link if you want to purchase Ron Bertino’s course; and a link to purchase the 5 Step course.
Hey, don’t forget to hit that like button on the way out, thanks.