How this Software Engineer Turned $2,500 into $200k with Options

[Music] hello everybody we are back with another rising star episode very excited about this one today shot welcome it's my pleasure you and i have been um i think corresponding back and forth for probably close to a decade now yeah um it's it's amazing this first time we've met though right it's wonderful to be here and see all these cases that i've been seeing on online well thanks so much for flying out to chicago i know you live up in the mountains near tahoe new mexico and been there once spectacular loved every minute of it um i wonder you're the only trader in town probably uh most likely yeah although i have inspired a friend uh who trades with me and he's learning trading so i would say two two traders in town two traders in town how big is the town uh so the entire town it has five thousand people living in it but i live uh maybe 15 miles from the main town and we have a population of 1200 people 1200 people yeah um you told me you were um born in india and and your dad was in the army so you traveled all around so you really didn't even have a home base as you would say yeah but um you came to the u. s in the early 2000s right right when you're in mid mid to late 20s yeah i was 26 27 yeah right and you and you're a software engineer yes and so i'm just curious when you came here obviously came here to work for some software company i'm i'm guessing right um and what happened uh what happened meaning uh how did i switch to becoming a trader yeah exactly like like like how long did it what where'd you where where'd you fall where was there a little disenchantment with um disenchantment with the engineering business or the software business okay what happened yeah so there was no disenchantment with with engineering i mean i'm still a coder at heart yeah i love absolutely love coding sometimes if i i'm just sitting around i'll just code something because it's so fun so but um when i was growing up in india my my dad was interested in investing at that time and he used to i remember he used to get these big long newspapers in the paper news yes which had quotes printed on it yeah sure and he would buy he would send a check to bombay which would take three days to reach bombay to buy shares and then after one month he would get like a confirmation and he had his portfolio physical portfolio where he would keep a list of shares that he had so i uh always heard him talking about shares and debentures to my mom but i didn't know what that was obviously at that time i was like 14 or 15. and unfortunately my dad passed away around that age because of cancer so that was the extent of what i learned from him but i guess it stuck around so yeah it's like a foundation yeah yeah so it was registering in my mind but i didn't know what it was so when i grew up that then i started getting interested in finance and investing i did work for a company uh um which was into finance i wrote financial software for them so i was immersed in finance and that got me interested in investing in finance you know it's funny i um i recently just invested in a very small company in india that teaches financial education so we'll see how that goes um but the markets over there are exploding and um they're getting better i'll say this and and the regulatory environment's getting better for trading so hopefully it'll be more of a global environment in years to come when did you kind of make the transition from out of being a software engineer into being kind of like a you know almost a full-time trader yeah so that uh it wasn't like a cut-off date right so i have been investing since 2005.

so it was a slow transition and the the time when i just you know kind of pulled the plug on just coding uh was when i started seeing consistent profits uh and it was it was a long journey i had my trials and tribulations i blew up my accounts many times i started with pink sheets that didn't work out well then i moved on to shares uh just buying stocks you know you're trying to scalp scalp or or whatever swing trade or do whatever you were with yeah so i was just buying stocks and i was like i didn't have in my 20s i didn't have any money yeah so i would set aside some money from my monthly salary to buy stocks but i quickly realized that you know many of the well-established blue chip companies were trading at above 100 a share and i was like i can't buy anything with the money i'm setting aside i had to i had to stick to stocks which were less than ten dollars and most of those companies uh have problems like you know they're of course unstable companies yeah of course and even if you buy a company which is let's say ten dollars a share what are the odds of that going to doubling your money in even one year it's very low so i i wasn't seeing any kind of returns for the risks i was taking and then i slowly moved on to options so it's a long journey i don't know what was your specific question well kind of like you know like i'm trying to get get a time frame down because your your trading career sounds like it's about a decade and a half or so yeah yeah yeah um so which is which is great because you know the rising stars don't happen overnight this is it's uh it's a lot i i i talk about this all the time now because it's a big part of of speeches i do but one of the keys to long-term success in the trading business is is being able to hang around for a long period of time it's duration it's being it's it's whatever you're doing making sure that you can sustain you know the some kind of growth or or or it's just longevity and you're a perfect example of longevity in the trading space yeah yeah and i i i believe the same so it's all about consistency it's not about you know taking one or two trades and you know gme or amc and becoming like making thousands of dollars of all but small small wins and it's all about um generating positive expectancy in your portfolio so that your winners are greater than losers so today in 2022 you're a full-time trader yes and a full-time trader living the dream in new mexico europe uh you're uh um you have a winter pass to taos i'm sure um you're probably an avid skier and you also haven't given up um on your on the tech side of your life which is because you run a non-profit to help small businesses in in your area yes and you provide you know free technical assistance coding assistance you're basically you know it's amazing what you guys do but um you pretty much give away your your know-how to help local economy yeah and you know like i'm i i'm really passionate about um engineering like coding in general yeah and uh it's it's like art you know like of course it's like my i let my creative juices flow with coding and uh what i found with the the community where i live in uh it's a rural community and it's not uh it's there are a lot of poor people there lack of access to get good education and when i moved there i thought that you know the businesses here need technical help and there are no companies here helping out like networking help website help stuff like that yeah yeah website you know google seo anything to do with tech basically yeah anything i don't say no to anything yeah and um so they were getting ripped off by companies sure yeah so i was like that gap needs to be filled they need a local person who they can just pick up a phone and just call them and hey i need this or my website is broken what do i do so i filled that gap with my company so that it generates some revenue and helps those businesses but then what i also did was that uh since i'm so passionate about technology i wanted to teach uh young motivated kids and give them like um real skills to uh make websites or stuff like that to earn a living so whenever i get a project from a local company what i do is i try to find a local motivated kid and i work with them so i'm doing the work doing zoom sessions or whatever and i'm teaching them at the same time it's amazing so you spend about two hours of your day doing that yes which leaves the rest of the day for trading yeah yeah so how i assume at this point you're you're pretty much a market junkie yeah yeah yeah so and i i'm not i don't remember because i've been to santa fe before but i don't remember the time what's the time change to center is it two hours from chicago or one hour uh it's mountain time so one hour one hour okay fine so that's not bad so then you're um you're basically from about 6 30 seven in the morning until you know whenever so i wake up at six a. m every morning okay so i wake up one and a half hour before the market opens sure so that gives me enough time to do you know my due diligence before the market so tell me what your due diligence says so like i have it's a long list of things i do so first thing i'll look at the futures okay same with me look at the futures look at the vix me and i actually trade uh i trade uh spy qqq dia all that stuff okay iwm so i look at that i'll switch to that and see where they're trading to and then what i do is i look at all the sectors individual sectors like you know financials consumer discretionary so like around like 15 16 sectors okay and what i do is i um i i know you guys don't like tech technical analysis yeah but it's okay you can do everyone yeah i do uh i do use technical analysis that's fine and what i try to do is i see which sectors are um i do mostly swing trading so what i'll do is like it's all about and you guys do mean reversion too but you do mean diversion with implied volatility yeah we do implied volatility instead of price yeah so i do i do price i do price mean reversion so i'll see any sectors which are over extended either to the upside or downside and then you make a mental note of this in the morning or do you like you know you wait for the markets to open or you already kind of have an idea of what you're looking at no i i i watch the markets like a hawk like all day long so like i literally like know which price which stock is trading at all the time without even looking at my screen of course so when a stock is usually or etf is overextended i already know that it is and i'm looking for signs of mean reversion and i use technical analysis to provide some confirmation when it starts totally fine changing direction yeah and when it when it does that then i st then you jump in and take your make your swing trade and then part of my morning routine is also i glance through my portfolio to see the existing trades that i have and if any trades need management so i'm before the market opens i have a full plan ready for that day and every day is the same i'm basically the same person i mean we we do a little bit different you know we have a few different little nuanced things but we basically do the exact same thing but then you me and a million other traders do it too i mean that's just the way we think it's all the same type of stuff um do you are you pretty much product indifferent at this point uh so um when i started out i had a really small list of stocks in my watch list like around 20. because my whole concept is that you need to be so intimately familiar with the price movement of your stock so that you can spot when the stock is over extended okay just 20 stocks as i gain experience now my list is around 200 stocks are you doing futures too i don't do futures okay so you just watch the futures but you're not trading the futures futures options yeah i don't yeah i watch the futures but i don't trade them so around 200 stocks in my watch list and then since i'm a programmer i have written scripts which help me uh because 200 is a lot to go through every morning yeah all that you love doing that because i deliberately make an effort to know which stock is trading where okay so by manually going through my watch list i'm uh like i'm not disconnected i'm always engaged with every stock so as the day progresses now i'm jumping ahead here for really what i want to be but i just curious to get your mindset as your day progresses a lot of times the market will do kind of what you think it's going to do early in the morning but there are other times like this morning um this is a perfect example where we had a huge down opening and next thing you know we have a huge that we're up huge you know the market can change direction you know like on a dime as they say exactly so so sometimes you have to make adjustments how many how often do you think you adjust stuff during the day okay so um i try to keep my trading life really simple so for example i don't do rolling uh what do you mean you don't do rolling i don't like i do options right so right i don't roll my trade so my rules are very simple so i do vertical spreads but i do debit spreads mostly i sometimes do credit spreads too but mostly it's the same thing debit credit same thing yeah so with debit spread i do i buy atm at the money spread that's what we do and um my goal is to um i i shoot for 94 profit on that every trade that i do so let's say i buy a dollar wide spread on qqq i buy it for 50 cents and i sell it immediately put this closing order for 97 cents at that time which is 94 roi on that trade i would do that too if i could pull it off but i don't pull it off that often so yeah so so that's what my that's what my bread and butter trade is and then what i do is instead of if if this trade starts going against me which it usually does because it's mean reversion trading so with mean reversion the whole concept is that you are keeping the long-term trend in mind but you are going against the short-term trend uh when you see signs of the stock or etf understand completely yeah i understand completely so if the stock goes against me i don't really my trade lasts for 30 days my everyday lasts for 30 days and if by day 15 the trade is not going in my direction that what i do is if the trade has lost 50 of its initial value i close the trade so that's how i handle my losers so yeah yeah and so going back to your question that if uh we have a ping-pong day like today right market it doesn't bother me much because my outlook is 30 days and i do my due diligence before entering the trade so i have been watching that stock for a long time to enter into a trade once i put on the trade my um like i don't all i care about is following my rules about loss management and profit targets and i'll give you another example so how often do you trade so i every day no i know but how many times a day do you know so um how many times a day i i guess i take all of all of my trades in the first two hours of the market opening okay yeah so uh so yeah so let's say i take three bullish trades for for one expiration and the expedition is 30 days away by day 14 half of the time the trades are flip-flopping and not deep in the money of course what i do is uh if i see any signs of the markets futures you know opening really deep red on any news i start retrofitting that expiration with bear put spreads so let's have three bull call spreads i'll add three bear put spreads so that if the markets turn against me let's say market is showing a 300 point drop at open so what that what that does is that it i don't make any money from the expiration because it's cancelling itself yeah but i don't lose anything but if by day 14 the trades have gone in my direction and i have like they're deep in the money then i don't care because by the time i'm generally safe within the first 10 days you will know if your trade is going yeah against you and how far out the positions are 30 days out when you put them on your 30 days out when you put the positions on yes 30 days out yeah so you know what's interesting about you is that i first um i don't remember when i first corresponded with you but this is very typical for tasty because we go on for years decades with people yeah i don't remember the time we first corresponded but do you remember the how you found tasty um i think uh so when i got interested in options you know being an engineer like i have a voracious appetite for reading i read like 60 books on options in six i read that in your bio you read 60 books on options yeah and then i was i wasn't satisfied enough because i was like i need to learn more about this because this is not what i was looking for so maybe i was on youtube and i may have found a video of you and then i just got hooked i have watched every single segment this is like 2012.

2011 2012 maybe it's that time that's right we started tasty yeah and the funny thing was in 2013 you had was it it was your daughter shyla yeah she called into the show yeah was did she call him the show was no i uh she was five years old she's five years old you sent me a video yeah i sent her a video she did right right you're right yeah yeah she didn't call i i know she didn't call it or wrong i didn't i wasn't sure oh she you sent me the video of her i sent a video of her explaining what time decays with the example of a melting ice cream yes we're gonna we're gonna we're gonna show that in this video because you're gonna love it because your daughter is very cute i sent you a video on time decay can you please play my video on time decay this was sent to me from actually you didn't send it to linda i sent it to linda last night well we both did that but but this is from a customer who said put together a very small one of our listeners who put together a small video on time decay and a brilliant job i think this person should write should review all the wall street journal things today's lessons on this on the stock market is time decay and what does time to k mean dime2k means that when you buy ice cream and when you just hold it then it melts away so when you buy an option and your stock market goes sideways then it's melting away thanks guys for listening to me bye that's perfect that's beautiful and she should walk into some reps office with a lollipop in her mouth and teach them about that she's six okay she knows more about time decay than the editors of the wall street journal she explained time decay beautifully with ice cream pop and explaining option decay that's all it's about it's about it's about reduction in cost basis because of time decay she can explain it but the editor of the wall street journal for whatever reason or one of the editors has no idea what she's talking about you know what that six-year-old just let's move her to the top she should be the managing director or the managing editor um and she's so let's see that was 2013. she was five so she's about 15 16 now she's almost 15. almost 15.

yeah amazing and she still trades she still trades yes that's in when i say still trades she's only 15. but um uh when did she make her first trade when she was like seven probably yeah yeah so and you know like i was really inspired by your uh segment called where do i start with your daughter case in it yeah yeah and i was like this is so amazing that casey is so young and she's learning all this stuff from you you know she was older than five so i was like you know i need to immerse my daughter in in this financial education from now on and just like how i i was telling my dad you know like he used to talk about stuff with my mom yeah sure and it sticks it sticks so that was my whole thought process that i will just uh immerse her and you know i don't force my daughter to do anything sure so like you know at least expose her towards um what all lies with in the world of investment and so so let's talk about um you know the whole rising star thing is is very subjective by us it's like you know person a could be a rising star because they've made 10 000 trades person b because they've made you know 10 million dollars person c because they've changed their lives you know whatever it may be yeah what's your rising star moment like like what what do you think that you reached out to me say hey tom you know this is i think i'm i think i'm a rising star and was it was it a certain return on capital um like give it to me what what do you think okay so i would say that like i was sharing with you that you know um becoming a full-time trader is a is a process it's not like on some day you wake up and you become a trader so so for me that uh if you if you were to call ask me what was that moment it was the day i had more winners than losers so the positive expectancy in my portfolio that i could see that you know yes i have losing trades but overall my portfolio is gaining value and then what i started doing was i was doing an experiment on my own i would take 2500 and see like if i can grow it into 25 000 which i know it sounds like crazy a big number in a year years time and i was able to do that consistently but just by doing debit spreads and having a list of rules and i did it many times and in fact i shared with you that in 2019 i started at 2 500 and again by 2020 i grew it to 25 000 and that time what i did was i was like let me try to see if i can scale it up so i continued that and then by 2021 november i was able to take it to 210 000 so the same that's amazing methodology it took 2500 to 210 000 yeah without taking without adding any more money no no no not earning any more money it was just repeating the same method which had been doing for many years but just scaling it up by adding more content yeah sure no that's fine yeah but that's pretty amazing because a lot of people will start with you know a few thousand dollars and and i'm and my argument is listen it's i don't want to tell anybody they can turn 2 500 into 200 000 because it's not fair um i mean there's obviously a few people that are outliers like you that have done it but i don't want to tell people they can do that because it's you know it doesn't i don't want to set crazy expectations the other side of it is i also don't want people to get discouraged thinking well i'm just going to lose 2500 hours because that's not the case and you're a walking talking you know living example of that that's and you said you've done it multiple times from 2500 to 25 000. that means you've also had some bad streaks too yeah yeah and talk to me about some of your bad streaks that you've learned from sure yeah and um so i have blown out my accounts many times first of all let me start with that yeah okay and that's how i learn as we all have yeah that's how i learned and i was sharing with one of your team members jules that what i did for many years was that i would start with 2500 and the moment i would hit 25 000 it could be any target could be like let's say your target is um 10 000 right i would withdraw that money and put it into my bank account and reset at 2500 and the reason why i did that was because when i was learning trading i've done this many times that i would grow my account over a period of two three years and just you know just celebrate my paper victories and then one bad correction like 2022 you know one bear market one bad correction that brings you to zero so that was a very uh defeating feeling and so what i did was every time i would reach a target i would withdraw that money and start all over again so because of that i've had some failures when i was trying to do my own 25 000 challenge i call these but the thing is it doesn't cause a big dent because i keep withdrawing money from my account and my the bigger bigger the 22500 to 210 000 uh achievement that i made that was my first experiment into can i scale this method that's great i mean that's unbelievable um you know there's a lot of things you do like taking the money out of the account you know like the the long debit spreads regardless of volatility the uh the the the the more directional swing trades there's a lot of things you do that we don't really pract we don't preach here um we have a different style of trading you know we don't play for mean aversion and price although we do naturally we don't like talk about it but um a bit more for me in a version of volatility but it's so funny what's important the important takeaway is that a lot of people are going to realize that um there's lots of different ways to play this game yeah and that's what i love about it you know absolutely i totally agree with you and the thing is you can be as creative as you want and what i realize is that with training and options in general you can come up with any trading methodology that you want only thing you need to do is have rules in place and stick to those rules what's your big rules give them to me this is we're gonna wrap it up here okay um i think yeah i'm running out of time here so i'm gonna wrap it up with your big rules here give me like your top you give me your top three okay if you i know i'm putting on the spot here but give me your top three rules sure okay so rule number one would be finding the right stocks to trade right so trade options okay so um maybe you have a price criteria liquidity criteria sure so i have a liquidity criteria first price second yeah so i have i have like 10 items in my criteria how i select stocks so that's one that's one rule the second is when to enter trades so you don't have to trade every day i mean i take between 700 2 000 trades a year so i'm not like like you guys i think i don't know how many trades you take like 15 000 probably yeah so you guys are you guys are up there it's insane so i do 700 2 000 that's good that's good that's 700 000 i mean you're that's legit you're you're a full-time trader sure so um so the rule is i have clearly defined rules of when to enter a trade whether it's using technical analysis or watching the markets in general like the macro environment avoiding when to get into trades like earnings events and all that stuff okay and then um like i was telling you that positive expectancy is such a big thing that i keep in mind that when trades go against me uh since my trades are 30 days out like i don't panic if on day one that's great it starts going against me because i have i have rules for uh cutting my trades when they start losing so i have this 50 loss rule that if a trade loses 50 of its initial investment then i cut it and as long as i can maintain that winners greater than loser's equation in every expiration that's all i care about and some some years are great where you can grow um one thousand percent some years are not that great and you can you are how has how has the down move in 2020 been for you 22 22.