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 November 2021. I’m going to share my real P&L for the month of November 2021 for my two separate accounts. Before I get to the P&L, I want to briefly go over what the market did in November. This will give an idea of what my trading systems had to contend with over the last month.
My question is always what type of market was November? 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 number: #1, the rising bull; #2, the sideways market; #3, the grind down market; and #4, the crash market.
So next I’ll go over what the market did in November. Okay, so what kind of market was November of 2021? Here’s the $SPX. We started right here and we ended here, down less than 1%; not really down. Just basically a sideways market. But the way that we ended the market was interesting, because on this day right here, which was the 26th of November, Black Friday, this was actually like a 54% increase in the $VIX. You can see it went here. It just jumped up.
That was about the fourth largest one day increase in volatility since 1990. So that was like a little mini-crash. And one of the things that I think I’ve mentioned before but I’ll mention again. With the Synthetic Dragon Portfolio, when the initial first leg of this high increase in volatility occurs, the Synthetic Dragon actually goes down with the market but then after that, regardless of what the market does it can go up, it can go down again.
The Synthetic Dragon will recover and actually profit, but what kind of market is this? Well, I would just call it a sideways market at this point. It could turn into a crash market. I mean that’s a pretty significant down day today, 1.5%. But starting from the beginning, I would just call this a sideways market with a little bit of a volatility spike in there.
If we look at the $VIX, let’s go from the end of October, right here. You can see that we have had a real significant move: it’s up 65%. So we had some like a pretty major increase in volatility. And what that does is it really hurts premium sellers–option premium sellers. This is not a good market for them. If they got in here. If they get in up here, maybe it’s a better market because the volatility will fall. They can make money but most of them have probably been in here and are getting hurt, right now. So it’s an interesting dynamic where the volatility has increased but the market went sideways.
Next I’ll get into the P&L. First, in my smaller account where I trade The 5 Step Options Trading Success Program, this is a system that 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. And I back-tested over 300 different trade plans until I finally come up with a successful system that it could trade in a smaller account that could outperform the S&P with lower P&L volatility.
Now, I make these claims based on the last 10 years of back-test results along with about 19 months of trading it live. Even though it does not replicate the exact system 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’s my 5 Step account for the month of November. Okay, looking at my 5 Step account, you can see here we started with $14,916. You can see it; just kind of stayed around that level. And then when things got really volatile, it actually kind of popped up. It kind of liked that volatility. And then when the market on the last day of the month there, where it came back down, it didn’t look like it liked it as much. But this volatility and this volatility it’s kind of… I’m sure it’s going to kick back into this norm. But I’m going to hold to the number that I ended up with at the end of the month which is $14,577.
So let’s do a little math here. $14,916 – $14,577 = $339. $339 / $14,916 = -2.27%. Well if you compare that to the market, it’s pretty even with the market. I would expect it to outperform at this level, but I think we’re going to wait a little bit for this volatility to subside a little bit or even get higher. And we’ll see really what happens here next month. My take is it’s just going to pop back into that normal range and probably be close to break even for the month. But let’s just call it what it is what the number I got at the end of the month; – 2.27%.
And I always like to verify, double verify, my P&L at the end of the month. You can see this November 30th. It’s the last day of the month for November. $14,577 is the P&L for The 5 Step account.
The edge to selling option premium is because implied volatility is higher than actual volatility, about 83% percent of the time. The system is designed to make money in any market environment while mitigating drawdowns. In the last 19 months while trading the system live, my highest drawdown has been only -2.27%, and this is almost like a super high yield savings account.
The system also is scalable if you want to take on more risk. This means you could double these numbers. So if I had higher risk tolerance over the last 10 years, I could have averaged around 20% to 25% with a maximum monthly drawdown of around 4.5%. And this would be allocating $4,000 per tranche. I would not increase the risk using this system allocating less than $4,000 per tranche. And again you can learn exactly how I trade this account by purchasing the course, and I put a link in the description below.
Now, I’ll get into my larger account where I trade my Synthetic Dragon system. Now, I got the name from Chris Cole’s Dragon Portfolio. The Dragon Portfolio was put together in order to produce positive returns in any market environment. The Synthetic Dragon uses options in a synthetic manner and has been back-tested and forward-tested and has at least 10 times more occurrences versus Chris Cole’s Dragon Portfolio.
Now, this system has created excellent results in a live account in all four market environments. Side note, this is a system I will use in my hedge fund for accredited investors and I’ll have a one million dollar minimum and initially I will max out at $10,000,000 to make sure the scalability before taking on more money. I have a 2 and 20 fee structure and we’ll use SMAs. Which means I will never have possession of my clients funds. 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 from 2008. This account has portfolio margin allowing me to trade with more leverage in order to take advantage of a certain trade structure.
Now, before I get into the results I’m going to go over my take on the market for this last month. The end of last month on Black Friday, the market had a mini-crash with a $VIX or volatility rose over 54%. Now, this was the fourth largest one-day jump in volatility since 1990. And this down day was not only significant for long stock portfolios, but it was a major event for option premium sellers.
Most premium sellers are hurting because this quick rise in volatility means that option prices in general have risen significantly. And when you are short options and they significantly go up, it can cause margi calls and forced liquidation for losses. And this is why it’s important to have a proactive plan in place before the volatility spike occurs.
Most beginner to intermediate level traders don’t have a proactive plan. Now, they may have a reactive plan when this occurs, but the problem with a reactive plan is what happened over the last few days since that initial down day. So what happened is the trader sees the market going down and becomes directional to hedge their portfolio and gets short. Then the next day the market will rise much higher and now the hedge has lost money. And the trader takes it off because they believe well the market will continue to rise and their overall portfolio will be fine. So they did lose money on the hedge, but they’re okay with that. But then the next day after that, the market goes down heavy again. And this is called whiplash, and it punishes traders with a reactive hedge.
Not only is your portfolio drawing down, but your hedge is also drawing down. Now the key to protecting yourself in this type of environment is having a trade structure and trade plan in place that takes advantage of the premium seller’s edge and is proactively hedged at the same time. now, if you could accomplish this with your portfolio and manage it in less than 15 minutes a week, then I believe you’ve got a really good system.
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 the computer stressed out all day when they could be learning how to do this; not to mention day trading is really unproven. So 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 November 2021. Okay, looking at the Synthetic Dragon Portfolio over the month of November, you can see there wasn’t a lot of volatility until this day here. Now, this is interactive so, you know, obviously it’s not photoshopped. This is my real P&L. This is my balance every single day over the month of November.
Now I started the month with $170,800 and I ended with $175, 225. Now, the adjustments that I made–how much work did it take for me to have this portfolio on? Well, I made one adjustment here on the 1st of November. And I made another adjustment on the, right here, on the 19th of November. So I made two adjustments, probably 10 to 15 minutes, let’s just call it 15 minutes, so I spent 30 minutes on this portfolio this month.
Okay, let me do some math here. $175,225 – $170,800 (when I started with) a profit of $4,425. Let’s see what the percentage is. $4,425 / $170,800 = 2.59% for the month. And you can see that… One thing, another point I want to make here, is you see this dip? This was that first leg down. This is the first time that the market got really volatile and this particular trade system does go down with the market on the first leg. But after the first leg, it recovers very quickly and actually it gets into profit like better than what it was before this little mini-crash.
And you can see it doesn’t matter whether the market would have went up the next day, stayed the same, or went down. If you remember, it went up really high and then it went down back all the way down, and still didn’t affect it. It’s just that first leg down. But there you have it; a very good month 2.59% with the market up less than 1%.
And whenever I remember, I always like to double verify my P&L. You can see today is November 30th. The markets closed. It’s the last day of the month: P&L $175,225.
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. And it’s from Ron Bertino and it’s called Trading Dominion. And it’s the PMTT Course.
Now, I’ve left the link in the description for my book, for my review of Ron Bertino’s course, and an affiliate link to Ron’s course if you decide to take the course. And if you 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 will send you an archived trade plan almost identical to the Synthetic Dragon.
If you have a smaller account, I recommend my 5 Step course. You can see the link in the description for that course.