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.
Now in this video, I’m going to go over my real P&L for the month of October 2021. I’m going to share my real P&L for the month of October 2021 for my two separate accounts. And before I get into my P&L, I want to briefly go over what the market did in October. And 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 October?
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.
Here’s what happened to the market in October. Okay, what kind of market was October 2021. We have the end of the month here. Obviously, we hit all-time highs here we ended at all-time highs. You can see because there’s the number up here. And we’re up about almost 7% for the month. Now, let’s take a look at the volatility; see what the $VIX did over that time frame. So we ended here. The volatility dropped significantly. There were not any significant $VIX or volatility spikes in the month. And we went up 7%. This is definitely what I would call a bull market.
Now, next I’m going to get into the P&L first in 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 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 could trade in a smaller account that outperforms the S&P with lower P&L volatility.
Now, I make these claims based on the last 10 years back-tested along with about 18 months of trading it live. Even though it does not replicate the exact system I’m using in my larger account, it is 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.
So here are the results for the 5 Step account for October. Okay, let’s go over the 5 Step account for the month of October 2021. Let’s see, here’s the end of September, and I know that we started with $14,813. And you can see this is interactive so you know this is the real account. It had a little bit of a downturn here, but not significant. Not really much volatility at all. We get to the end of the month, which should be October 29th. On October 29th, we got $14,916.
So let’s do a little math here. $14,915 – $14,813 = $103. It’s about $103 in profit and what percentage is that? $103 / $14,813 = 0.69%. And it’s about 0.69%, about a half percent increase. Which is much better than a savings account. Again, very little risk here, very little volatility, and a half percent. That’s pretty good. So there you have it for my real P&L for October for The 5 Step account.
Now, 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 18 months, while trading this system live, my highest drawdown was only 2.27%. This is almost like a super high yielding savings account.
Also, the system is scalable. If I wanted to take more risk, I could double these numbers. If I had a higher risk tolerance over the last 10 years, I could have made an average return of around 25% with a maximum monthly drawdown of around 4.5%. Now, this would be allocating $4,000 per tranche. I would not increase the risk using this system; allocating anything less than $4,000 per tranche. You can learn exactly how I trade this system by purchasing the course. And I put a link in the description below.
Now, I’ll go over 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. The system has created excellent results in a live account in all four market environments.
Now, side note this is the system I will use in my future hedge fund for accredited investors. I will have a $1,000,000 minimum and I will max out at around $10,000,000. And then make sure that it’s scalable before moving on and obtaining more money. I will have a 2 and 20 fee structure and will use SMAs. Which means I’ll never have possession of the funds and the name of the 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, I’m going to get into my take on what happened over the last month or so in the markets. Now, September was the worst month for the S&P since March of 2020 when the market crashed. And September most likely caused some large drawdowns for options premium sellers that did not carry any kind of downside hedge. Now that month, the market went down 5% but the volatility remained relatively tamed. Now, the Synthetic Dragon was down less than 1% while the market was down close to 5% in September.
These low drawdowns are the key to success. If a portfolio can break even or make money when the market drops down and make money when the market goes higher then the portfolio will outperform as it does not have to make up for losses.
Now looking at what happens with drawdowns. You can see here if you have a 10% drawdown, you need to make 11% to recover. Which is more than likely doable, but when you get started getting into these lower levels, you get a 50% drawdown. Now you have to have a 100% return to recover. So you can see it’s very important to prevent drawdowns.
Not drawing down is the key to outperformance. With the market up around 7% this month and down around 5% last month, you can see the market really hasn’t moved too much over the last couple months. If a hedge premium selling options portfolio has done better than just
2% over the last two months, it is outperforming.
What if your portfolio could outperform and be hedged against the crash? What if that same portfolio could be managed in less than 15 minutes a week? 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 when they could be learning how to do what I’m doing. Not to mention that day trading is unproven. Now this is why I highly recommend learning about options and adding another dimension to your trading that can create a real edge.
Now, here are the results for my Synthetic Dragon Portfolio for the month of October 2021. Okay, let’s take a look at the Synthetic Dragon Portfolio; how it did. You can see that this is interactive. Which means that it’s the real live account. Not a lot of volatility. Kind of made our way up, kind of hit a little peak, and then worked our way back down a little bit, but still a good month.
I started with $163,522 and ended with $170,800. As you can see here, right here. So let’s do a little math. $170,800 – $163,522 = $7,278. Equals a profit of $7,278 for the month of October.
Let’s see what the percentage is. This number, $7,278 / $163,522 = 4.4% return for the month of October 2021.
And again, whenever I have the opportunity to show my P&L with the timestamp on it. In the account: $171,327. There it is, there.
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, 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.