Hi there Tackle Traders! If you’ve been a member of Tackle for a while you know that our coaches here love what they do and more importantly that you love and see value in what Tackle puts out daily to help you in your trading journey and daily routine. They also love sharing stories about their students and I can tell you that they take pride in seeing each of you evolve from the time you get them to the time you put on your first trade to the time you do your mentorship, meet your financial goal and beyond. It’s the reason why they encourage all of us to get plugged in, ask questions and share our journey about what systems we are trading and the success and setbacks we face as traders. You’ve probably even heard some of these stories on the Trading Justice podcast or you’ve read them in the clubhouse and the blogs. These stories are heartwarming, inspiring, motivating and relatable to all of us to one degree or another. My trading partner and friend Rosemary and I have heard the pleasure of being on the podcast with the Justice Brothers a time or two and we are always humbled and honored when called upon to share our stories. The funny thing about my particular story is that you might get a slightly different version about my trading journey depending on which Justice brother you are talking to and if you’ve heard both versions they are both true but allow me to shed more light and merge them together.
Matt’s version – “Her very first trade was an Iron Condor on Amazon”
I, like most of you, attended a 3-day basic training in my hometown and much like most of you did, I made the decision to further my education in the financial markets and hire a mentor to become a professional trader. Matt was my instructor at the basic training and as I was going through my advanced classes and plugging into to the Tackle community, got to know Tim as well the other coaches and mentors. I wasted no time in learning the broker software and after watching enough how-to videos from the video volt in Tackle, I could build a trade without even knowing what the details of the system I was trading were. The vocabulary I heard during that 3-day workshop was beyond me and the one that caught my attention thanks to the one and only Bobby Shannon was the Iron Condor! I can remember Bobby drawing out the Iron Condor on a piece of paper and him telling us we were going to love it! For Rosemary, it was the Naked Put that did it for her and she will have to share her story in another blog because it’s also quite funny. Anyway, a few months after that basic training, I had put on my very first Iron Condor trade on Amazon among other things such as getting out of mutual funds and replacing them with ETFs. It just so happened that Matt was in town again to teach a brand new set of students so Rosemary and I went to visit him and the team. We were so excited to talk to him about our trades and when he asked what we had traded and I don’t think he was expecting to hear “I have an Iron Condor on AMZN”. After getting over the initial shock, I then told him how and where I got the idea to place that trade and that I had followed the time and delta rules related to the strategy. As a coach and mentor, he was pleased that I had executed an advanced options strategy yet I had not yet taken the options class. He began to explain to the students and described it as a complex 4 legged advanced option trade I did not see that way and I did not over analyze not knowing all the details. My thought process was if I follow the rules and do as instructed and I had the support I needed, why not put on the trade. I realized that is was advanced once I took that options class. The next step was to start preparing for mentorship, and we had a discussion to make about who we wanted to be our mentor. Although we had not decided, it was either going to be Matt or Tim.
Tim’s version – “She was too directional and needed to add cash flow systems”
A couple more months went by and of course that Iron Condor trade had since expired and I had moved on to what I thought were bigger and better things. Once we took that options class I then started buying call and put options. These are trades I probably should have started with rather than the condor as a newbie but I was going for extra credit and a smiley face sticker from the teacher. LOL! I was profitable buying options so much I started trading less and less of the credit spreads and got hooked with buying. Even though I’d experience losing trades, I was hitting some great home runs which made credit spreads look less attractive. For the margin amount the broker was holding for a credit spread, I could buy a certain amount of calls and make a ton more than the $50 to $100 received on credit spreads and not have to wait a month for max profit. Mentorship was approaching and the decision had been made that Tim would be our mentor. (Matt never lets me forget LOL!) The pre-mentoring process began and one of the things a mentor will want to see is your trading journal and screenshot of current trades to start working on your portfolio design. Tim and I had exchanged emails, texts, calls and got online a few times to prepare for mentoring then soon enough it was time to fly out to Salt Lake. This is where we implemented a portfolio design specific the goals we wanted to achieve. This is also where Tim’s role as mentor was very crucial. He knew just by looking at my account that I was too directional in my trades and I needed to correct that. He did not mince words when it came to this and I am so thankful and he was that direct with me. Even though early on I had embraced a cash flow system all be it an advanced one, I lacked the knowledge of what it truly represented which is giving up some of the gains for consistency in cash flowing the amount of money I need to pay the bills. He took the time to explain the risk in being over leveraged in too many directional trades, which would result in a major draw down or run the risk of ruin. We properly allocated a portion of my portfolio to those directional trades and got back on track to adding cash flow systems like covered calls, naked puts and a few bag of trick trades for volatility and my love for the Iron Condor was resurrected once again. We had a great 3 days of mentorship and this is also where Women In Trading was birthed. Looking back now and understanding what delta and theta represent in terms of market posture and cash flow, I was at 475 positive delta and -47.32 negative theta. Meaning I was VERY bullish and based on the negative theta number I was losing $47.32 a day based on time decay. I learned to pay close attention to those two numbers regardless of what the market was doing.
There you have it! That’s the back story and you can now see how the Justice brothers story of me as a trader came about and also my relationship which each of them. We call them both our mentors and even though Tim enjoys claiming that title as his, Matt always reminds him that he met us first while Rosemary and I sit on the sidelines and humbly soak it in. You now know that I love my condors and my directional trades and when properly allocated, they both still exist in my portfolio. I have had my fair share of cash flow systems go against me that I’ve had to manage or take a loss on. Those of us trading the Cash for Condors on the RUT can surely write a book on that but for the most part we consistently cash flow 10-15% a month with very little management. The directional trades also have their fair shares of wins and losses but I have a natural tendency to be the good shepherd and leave the 99 to go after the one sheep that is lost. Yet this parable has not worked in trading because it is driven by greed. Last month my greed, ironically enough on Amazon got me and left the original trade alone last month would have been profitable even with the RUT breaking resistance and potentially producing the first losing month of the cash for condors system. So here’s what I did wrong, to begin with and the mistakes that followed. If you recall, part of my daily routine is to determine my beta weighted delta and theta numbers. On April 26, I was noticed I was heavy on the bears side based on the delta number and fine on my theta number. I decided to add bullish trade and Amazon which was also reporting earnings after market close. I placed the 20 JUL 1500/1510 bull call for with a max profit potential of $484. I was expecting AMZN to gap up and instantly I’d be in the money, take my profits and run. AMZN closed at $1517. Well, earnings were announced and Amazon did what I expected it to do holding the upward price overnight creating a gap up and the following morning opening at $1634. I was going on a field trip with my son that Friday morning and really did plan to trade anything just a quick other than a quick check at market open and once during the day. On the bus ride to the Naval Academy, I checked on Amazon prices and they were still holding up and I started to entertain what if’s ideas with amazon profits that would put me back to break even for the year. I was down 5% from the unexpected volatility in February and rather than focus on my theta number and I let the profit and loss column drive my emotion and decision making. Before I knew it, I had an order to buy back the short call at market open which would leave me with just a long call. Immediately breaking the risk to reward ratio rule. I also put an alert to notify me if Amazon when down to a certain price point in case investors decided to take profit I would then sell a short-term call which would then turn it into a diagonal spread. By the time the market opened, we were at the Naval Academy in Annapolis and I was now responsible for my son and 3 of his friends. We got on a boat ride and I missed the alerts I had on Amazon. By the time I was even in a position to manage the trade I was down signifactly and closed the remaining call for a loss of 9% of the account. Amazon closed that day at $1572 a $70 range from the high to the low of the day and if had just left the trade alone that price movement would not have affected me at all. The weekend came and went and on Monday morning the loss on Amazon was fresh on my mind and even though I tried to ignore it, the loss number was REALLY grabbing my attention now that it was a much higher number compared to the one that was there the week before. I decided to get back on the Amazon that day and I probably should have waited a day or two to try to recoup some of those losses. Its been in that range of the low and high of the gap for an entire month and right now instead of taking close to max profit of the original trade, I’m writing a blog about a trade that caused a drawdown because I was being greedy. So rather than bore you with different technics I have and to do since that Friday I’ll let leave you with what I learned from this very costly mistake.
• Stick to your rules no matter what
• Do not modify trades if you cannot manage them in your usual environment
• If you had planned to take a day off from trading, TAKE THE DAY OFF! (my job that day was to be mom and chaperone nothing more)
• Reach out and ask for help or talk about your decision with someone before execution
• Dont be greedy
• Don’t be greedy
• Don’t be greedy
It’s better to be a cookie monster than a greed monster. There will come a time to be greedy in the market, however, Friday, April 26 was not.
Until next time Tackle Traders!
Until next time traders,
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- Emily Muiruri, an Entrepreneur, Real Estate Agent and Business owner. Born and raised in Nairobi, Kenya before her family moved and settled in Maryland. She began her trading journey in January 2015 after 17 years of Property Management in the Self-Storage Industry. Emily uses different strategies to trades stocks, options and forex. Although still a student learning and enhancing her trading skills, she has strong desire to teach women to take control of their finances and become traders. Writing blogs is one of the ways she’s is looking to spread the word and get more women involved. Emily knows that with the right education and trading system women can be successful traders
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