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, unless I’m doing a review of course.
In this video, I’m going to go over my real P&L for the month of September 2021. I’m going to share my real P&L for the month of September 2021 for my two separate accounts.
Before I get into my P&L, I want to briefly go over what the market did in September. 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 September?
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.
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’m going to go over what the market did. Okay, how did the market do in September 2021? And of course, this market is represented by the $SPX, the S&P 500. We ended the month here, and the end of the month of September here, ended last month up there. So down 4.75% on the month.
One thing that’s interesting is that the volatility didn’t really spike too much. I mean, you’re only at–the $VIX is at 23. So, you know, down 4.57% that’s a pretty significant move, but the volatility… Let’s take a look at the volatility.
Volatility started here around 16. It actually got all the way up to 28 at one point. And we ended here at 23. So we did have a relatively significant spike. I mean, I wouldn’t say this was a very high spike, and when you take into consideration this 4.5% or 5% down move the volatility did not spike like a crash. So this is a grind-down market. In fact, this is probably the first time I’ve ever identified a grind-down market since I started doing my P&L back in, I believe it was May of 2019. So we have not had a grind-down market since October, November, December of 2018. But this is not a real significant grind-down market maybe yet, because it’s only down, you know, 5%. Now, if it goes down maybe 15% or 20%, you know, then I would say, yeah that’s a significant grind-down. So there you have it for the market–overall market-for September of 2021.
Next, I’ll get into my P&L. First, in my smaller account where I trade The5 Step Options Trading Success Program. This is a system that is proprietary and took me over three year 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 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 of back-tested results along with about 17 months of trading it live. And even though it does not replicate the exact system I’m using 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 let’s get into that.
Okay, here are the results for my 5 Step, my small account. You can see we’re actually down pretty good just today, which is, you know, this thing was oscillating back and forth. It could be up or down. It just happened to close right there but the account started $14,987, right. And you can see it kind of fairly level. Kind of picked up a little bit. Then we saw that we had that Monday; we had that spike where we the $VIX went to 28. And it looks like we went down about $500 there. But even as the market kind of held and went sideways, and even down this quickly recovered.
So it’s kind of like that first leg down and then and then this trade recovers, and we had like a second leg down today, and you can see that we that we’re not down that significant. You know, down to $14,813. So we’re down $114 for the month of September; down about 1.1% with the market down 4.75%. And I think that’s pretty good. And we’ll also notice that this is going to snap back pretty quick. This system will snap back into profitability once the market either levels off or grows higher.
As I have stated before, the edge in selling option premium is because implied volatility is higher than actual volatility 83% of the time. The system is designed to make money in any market environment while mitigating drawdowns. In the last 17 months, while trading the system, my highest drawdown has only been 2.27% and this is almost like a super high yielding savings account.
Now, this system is scalable. If I wanted to take more risk, I could. And this means I could double these numbers. If I had higher risk tolerance over the last 10 years, I could have had an average of over 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 of using the system to using less than $4,000 per tranche. Now again, you can learn exactly how I trade this account by purchasing the course and I put a link in the description below for The 5 Step Options Trading Success Program.
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 and has been back-tested and forward-tested to produce good results in all four market environments.
Now a side note, this is a system I will be using in my future hedge fund for accredited investors. I’ll have a $1,000,000 minimum and I will probably max out around $10,000,000 just to make sure that it’s scalable before taking on more money. And I’ll have a two and twenty fee structure. And I will use SMAs. Which means I will never have possession of my clients funds. And 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 in 2008.
Now, 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 talk a little bit about my take on what’s going on now in the markets. This month was the worst month for the S&P since March of 2020 when the market crashed. And this last month most likely caused some large drawdowns for options for premium sellers that did not carry any kind of downside hedge. Now, the problem was mainly delta rather than vega.
In other words, the market went down but the volatility remained relatively tamed. This is typically not good for the Synthetic Dragon. This type of market, this grind-down market, but it takes more than a 5% drop without a volatility spike to have any kind of significant effect on the Synthetic Dragon.
Now, this month’s P&L would be much better if it were not for the Domm Hedge. And I am holding the domm Hedge in the account. And that hedge has its good times and bad times and it always ends up breaking even, but this month was a bad month for the Domm Hedge and that kind of held back the P&L for my overall portfolio. And this is fine, you know, it’ll recover.
And I’ve decided at this point to only trade the Domm Hedge of my other accounts as I want this account, the one that I’m sharing with you, to be a pure Synthetic Dragon system. Actually, the portfolio did quite well considering the rare grind-down market type that we’re in. And this is why I highly recommend learning about options and adding another dimension that can create a real edge.
So here are the results for my Synthetic Dragon Portfolio for September 2021. So here in September 2021, we had an ending balance, or I had an ending balance, of: $163,522. The ending balance last month was $164,736 so there was a little bit of loss there. But you can see this is an interactive result. We’re going nice and high there. We had that one Monday, that kind of first leg down and it kind of knocked it down here, you know, $3,000 or so. But then it quickly recovered.
So even though the market didn’t totally recover, the market just kind of went sideways, you can see how quickly this recovers and actually increases the P&L over the past. Nut then we had that second leg down, today, so we dropped again but as soon as the market goes sideways or up a little we’ll get this quick spike in recovery. And we’ll actually be ahead of the game when we get that recovery. That’s what I like about this system.
But let’s do some numbers here. Okay, we had $164,736 – $163,522 = 1$1,214. So we’re down about $1,214. Let’s divide that $1,214 / $164,736 = .7%; not even 1% a point seven percent. So we’re down -0.7% with the market down 4.75%. So we outperformed the market by about 4%.
And like I said before, once we recover and go sideways, we’re going to pop this. This thing’s going to pop up in P&L much faster than the actual market. The actual market is going to have to go up 4% or 5% to recover. This system doesn’t need the market to go up at all. It just needs it to go sideways for a little bit or have the volatility kind of come in a little bit. And also the skew come in a little bit and boom, it’s gonna, it’s gonna come up here into this nice profit target profit area where it’s gonna hit all-time highs Again, which is always a good thing.
So there you have it for September 2021 for the Synthetic Dragon Portfolio. Now if you want insight on how I trade the Synthetic Dragon portfolio you can purchase my book called 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 called Trading Dominion.
And I’ve left a link in the description for my book, for my review of Ron’s course, and an affiliate link for Ron’s course. If you decide to take the course, and use my affiliate link when you complete the course, you will 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 almost identical to the Synthetic Dragon.
Now, another option would be taking my 5 Step course. This is more for people that don’t really know too much about options and want to learn how to better apply options in a practical manner. And you can see the link in the description for my 5 Step course.