Wrapped up my 18th year of trading

I just wrapped up my 18th year of trading options. Without a doubt, trading has changed the trajectory of my life. I'd love to share elements of what I've learned across the years to help someone else on their path. I'd love to help share the litany of mistakes I've made and things that have helped me.

For those interested, here's a cliff notes summary of who I am:
I grew up poor with a single mom. We had food and a house but struggled heavily with money. I lived in a violent area, walked through metal detectors daily, which funny enough I had a knife pulled on me twice (apparently didn't work lulz) and was stabbed in my hand once fighting to defend myself. I'm 33 years old now and started trading at 17. I was in JROTC since 9th grade and had an instructor that served as a mentor to me. He saw I was working a bunch of jobs and asked what I was doing with my money. My mom provided an ideal example of working hard, she had 2 jobs for a long time but was terrible with money, so I just was saving and helping out at the house. He introduced me to the concept of investing. From there, I hit the library to learn as much as I possibly could. Because of the same mentor, I ended up not enlisting in the Marines but applied for a scholarship which I won and became a Marine officer. From high school through my entire working career, I traded. Through continually working additional jobs, aggressively saving, and trading - I hit my primary goal in my late 20's to retire my mom and ensure she was taken care of financially, she had no retirement plan. I became a millionaire before 30 and have continued to compound. I do things like this now because that teacher took the time to share some life lessons with me and it literally changed my life, I hope to help others. I have an undergrad that was stats heavy as was my MBA. Statistics provides a great framework for analyzing the world around us and what you need could easily be learned via ChatGPT).

My general trading approach is discretionary and based on adapting to current market conditions. I've maintained a 31.6% CAGR from 2007 to 2024 with the last two years being my top performances, and skewing that metric a bit. Removing those, it's mid 20's. I've had two negative years, my first two both down less than 5%. My initial philosophy was not to beat the market to the topline every year but minimize my participation in the drawdowns which would allow me to outperform the market.

My options trading approach:

  • Mix of long and short premium ebbs and flows but typically 30-50% of volume is buying with the residual as selling.
  • I split my portfolio into two broader buckets: Core and Speculative allocation. In my core allocation, I typically use a trend following approach in an index (or leveraged) index ETF. This gets the bulk of my capital and I trade a covered strangle typically here. The Speculative allocation is much more dynamic and designed to take advantage of whatever the current market conditions are. I generally trade Ratio Diagonals (call and put), short straddles/strangles (generally for VRP, earnings, and 0DTEs), and long/short single options.
  • My favorite options trading books: Options as a Strategic Investment, Positional Options Trading, Volatility Trading, Option Volatility & Pricing.
  • Top 3 things that helped me on my path
    • 1. Creating a written trading plan and demanding that I think through things ahead of time. I wanted to have strategies that would allow me to trade every market condition. I made frameworks to make planning, decision making, and researching more efficient.
    • 2. Planning. From my start as a trader, I spent a lot of time planning my prospective path to help me frame my near-term actions in the context of longer term goals.
    • 3. Papertrading with two distinct mindsets: 1. Deploying the portfolio as if it was my actual money (because I knew it was going to be) and 2. To test ideas and variations to strategies.

Hey everyone! Hopefully was able to share some useful nuggets. I’ll plan to do another in a month or two. Have an awesome weekend!