Rising Stars is a tastytrade show where some of tastytrade’s biggest fans come on the show to share their success stories. Read the post below and watch the segment included here to learn more about John W. from Texas!
TT: Tell us a little more about yourself. What did you do before you became a full-time options trader?
I worked in various sales and marketing roles in oil and gas. I traveled to Peru and Canada, Belgium, Portugal...I’ve lived in 7 countries, and even though my work wasn’t finance related, I majored in finance and later got an MBA.
My wife loves what I do because it puts her to sleep. She’s a nutritionist.
TT: How would you describe your trading style?
I have 3 categories:
1. Core position. Strangles and strangles on SPX. One thing I started doing this year is duration diversification. I do a daily strangle, and a weekly straddle in SPX. I move my straddles higher. Focusing on these core positions takes time.
I’m trying to do equal credit. 2 contracts strangle and weekly straddle. It keeps me engaged.
2. tastytrade. These are the positions I put on based on what I learn from tastytrade.
3. Wheel of fortune trades. This is where I sell puts and covered calls.
***SIDE NOTE: John brought cowboy hats for Tom and Tony to wear and it was amazing.***
TT: How do you manage your winners?
25 straddle, 50 for strangle, I go for 45 days out until expiration.
TT: On the flip side, how do you manage losers?
I have a two times credit received, which I think is a good rule of thumb. That goes for my 'core' category.
TT: How do you not get emotional about your trades?
Stick to your plan. By sticking to my plan I keep from becoming that quarterback who keeps calling audibles thinking the market is going to blitz him. I have my profit target of 50% for strangles and 25% for straddles. My loss is 2x credit received. That's it. No more thinking.
TT: Do you trade earnings?
I do trade earnings. I didn't during the last cycle. My view is you must trade a lot of them or don't trade them at all. Why? You need the number of occurrences.
TT: What tastytrade or dough resource do you find is most beneficial to you?
This Market Measures segment on active trading vs. passive investing was very helpful. The tastytrade research team has all of these studies - is it better to do something than nothing?
What I like about Market Measures is that it’s like a menu... you can choose what kind of risk you can take. Once a month, I do the 100 point put spread which I learned from Market Measures, and I do it systematically.
I also talk to finance students at universities in Texas and I’ve told them to check out the doughjo.
TT: You talk to students about options trading? Cool! What do you tell them?
They generally don’t have a basis for this, and so you have to start at the basics. Like I said, I’ll send them to the doughjo and then also tell them to look on the follow page at the novice traders. The traders with smaller accounts are better for them to see, as well as the types of strategies they use.
TT: Do you have any advice for new traders?
Start small but keep it simple. You gotta know your strategy so you can manage your risk. I would say sell a put once a month and see what happens.
Also, have a plan. Don’t go in not knowing what you’re doing. Find out what the minimum is you can start with ($2,500).
One day, it will hit you that you will be managing money and there’s another way to do it.
Buy and holding scares me. if you have a large portfolio, you’re on the whim on the market.
Backtesting to me is very helpful.
TT: How did you get into trading?
My father is in private equity and his friend said to take a look at options. And then my dad told me to check it out. Now we’re both obsessed. When I started, my dad said you have three months to learn and if you don’t grow the portfolio, we’ll find someone else.
TT: What’s your daily routine?
I’m looking at the screen less over the last three years.
TT: What was your moment where you thought ‘I get this’?
It took about 9 months. Month 5, I was trying to do 20 positions a day. I was staring at the /ES at 3am thinking, is there an opportunity tomorrow? The other moment was having 80 positions on at once and not feeling scared.
Watch the segment here:
For more Rising Star success stories, go to the tastytrade show archives here! And if you have a question or comment for John, leave it below!