240: John Carter – MORE Aggressive Trading, MORE Million-Dollar Wins

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Hi, I'm Tessa, Aaron's co-host of the Chat with Traders podcast. In case you missed the announcement about some changes in the podcast, You can hear about it in episode two hundred thirty-eight. I'm happy to introduce episode two hundred forty of the Chat with Traders podcast. In this episode, Aaron and I chat with Mr. John Carter, who you may remember was on a very popular episode of the show speaking with Aaron, who was in his earlier podcast years back in 2016.

This was episode sixty nine. In that episode we learned that John was an aggressive trader And I would say that he's still an aggressive trader. John's been trading for about thirty years now, which I consider it to be such an accomplishment in of itself, because it's tough to be able to stay in this game for that long, to say the least.

But John's also achieved phenomenal trading success mostly with trading options, which we'll learn more about shortly, about some of his really big trades in 2020 and 2021. and also we'll learn about his thoughts on the current trading environment. One of the things that really appealed to me about John is that he takes a holistic approach to trading There's a humanistic feel to the way he talks about trading, which we don't get to hear often.

so naturally we'll chat a bit about trading psychology as well. There will be articles and videos mentioned in this episode, which can be found in the show notes at chatwithraders dot com slash two four zero. Now, without any more delay, let's head on over to our chat with mister John Carter.

No, John, I was looking back at uh or listening back I should say. to our first episode before uh jumping on the call here. That was in twenty sixteen and I know that million dollar Tesla trade was uh quite a big deal at the time. You know, these days it kinda seems like it's nothing out of the ordinary for you. Well, you know, well, first of all, it's it's cool to be back on this and and secondly I can't believe it was that long ago when we did our first call together.

uh t you know, time kind of flies. And no, it you know, twenty twenty and twenty twenty one were incredibly remarkable trading years. And so, you know, the first Tesla million dollar trade for me that we talked about on the call. Yeah, that was certainly at the time a you know, kind of a you know, almost like a this a mind numbing achievement, like, Oh my god, that wa that happened in one day. And then um

You know, twenty twenty rolled around and in in in between, you know, twenty fourteen and and twenty nineteen, there were some nice trades, but it was more, you know, the markets were just different. You had to sit in trades longer. And then twenty twenty happened and all of a sudden I I think it was something like seven million dollar trades in twenty twenty.

And then, you know, uh like maybe four or five in twenty twenty one, including my biggest trade ever. And it's so so it was it it gets a little surreal and I I do think that there's a challenge, you know, one of the challenges in trading is to um

Uh and of course it w it wasn't all easy, right? There's there's ups and downs, but it's you know, the challenge in trading is to not get too you know, if you if you go on a winning streak, a lot of times that's that's where you're you're at your biggest danger because it's all of a sudden it's like, Oh, you know, I've made it and I don't you know, I don't need to be careful anymore.

Or or whatever. But the reality of it is is there are times You know, when everything comes together in the market where a big trade like that, a focused trade. is available to you. And so part of it is recognizing that, but more importantly is recognizing when that is not available. So, you know, if you're the the worst thing you can do is try to make a million dollar trade.

Um and of course that's a combination of position size and and and duration, but trying to force that when, you know, the market's not ready to do that at all.

Yeah. And and twenty twenty was obviously a standout year for you. I think the biggest uh year of your career. And that's a thirty year career by this point. How ready for that were you? Like when you when the market started to unfold, did you feel as though my experience over the 30 years has kind of been preparing me for this? Or were there still a lot of almost doubts or unknowns or uncertainties in your mind going into that.

Yeah, okay. So that's a it's a great question. So uh as I and as I think back on it, so uh first of all, a lot of things happened, right? So first as I as I think back on that year, um In in in February, and this just popped up, my wife and I, we did a a two week trip to India. Where we went to this place called Vidatta Academy. And it's basically it's a week long crash course in the Bhagavad. Okay. And it's this totally random thing that we did. It was amazing.

But this was all happening when this talk of COVID was happening. And it's like we kind of took maths on the plane, but they weren't required and we weren't really sure what was going on. And then of course by the time we get back, you know, the world goes on lockdown. And so I bring this up because when this happened

We lived we had a place in the city in Austin and then we have a like a kind of a ranch outside of it. We decided that we did not want to spend lockdown in the city. And so we packed up all of our kids. And we moved out um to the ranch in Wimberley, Texas, which is where I'm right now still. And so during this time while I'm trading, you know, we're trying to get set up. Uh we didn't have internet. We had to get internet set up. Um

Uh funny story is that while we're here, I was like, man, if we're gonna be out here, we might as well get up in the morning and see some zebras. And so we end up Getting some zebras and wildebeest and kudu'cause we're big fans of uh Africa and we didn't know at that point would we ever be able to travel there again. So while all this is going on. the market's happening right now March 2020 for me was not was not scary at all. I've been through you know the 2000 crash, 2008

Um, so March 2020, uh it w it it didn't have any big trades that month, but made money. And and frankly, those are the kind of markets where I just remember spending a lot of time in 2008 in those kind of markets. And just knowing like, okay, in this kind of market, this is a day trading market. I'm not gonna make any huge bets overnight. You know, this is uh get in, get out fast. And so I'd experienced that before.

But the unknown was ha what's gonna I mean, is the world coming to an end? Right. And so psychologically, I just made a commitment to say I am going to uh and it's something that Mark Douglas says in his book. It's like I don't, you know.

you you're not gonna you don't you have no idea what's gonna happen next, uh but you don't need to know what's gonna happen next in order to make money. And not only was I really focused on applying that to my trading, but I was also focused on applying that to my life. Because I we had you know, there's hasn't been a pandemic. since like the Spanish flu in nineteen eighteen. So nobody almost nobody that's alive had experienced a pandemic before.

So so in terms of trading, January, February, March, and April were actually all positive months. But they weren't there was nothing great. There was a good silver trade. There was um, you know, some here and there, but it was it was great. It was a nice nice positive. I think my first down month was in May. Uh wasn't a big down month, just whatever. It didn't come together. Uh but then whatever happened in June.

Um, things really came together and I had like a m a million dollar trade in June in Tesla.

um another million dollar trade in July and I think uh then was like a three and a half million dollar trade in August and then another you know, it was just it was one of those where it was kind of like a forest gump moment where The mindset that I had brought to the markets, which was a combination of aggressiveness and just anything can happen and being willing to really get out if it's not working, it played out really well because I was willing to let winners run.

versus like, my gosh, I don't know what's gonna happen. I gotta profit. Let me get out. And I was willing to sit through the uncomfortableness night after night in some of these trades where you're in these trades for, you know, for a couple of days or a couple of weeks.

Um whereas I'm not um you know, that's not always something I want to do. I mean, there's times like in this market right now, you know, we're talking in in July of 2022. I hate over You know, this is to me is just like let me, you know, let me try to make some money during the day and then I'm gonna go flat and and take it easy. Do you think that your zebras had anything to do with your uh positive performance as well?

So i you know, okay, so it's a great question and I think the benefit of the zebra. and the kudu and the wildebeest and all these animals. was that I, you know, and we have it it just being able to go and we have a couple hundred acres and they they roam free. They're not like, you know, sectioned off or anything. But I loved going on hikes and just seeing if I could run into them, you know, if I could find them.

And I think that was a big important part of keeping my head clear. And I'm I'm a huge believer in that. In you know, in order to trade effectively, you cannot stare at the charts all day. And in fact, you know, there's this, you know, there's a it's very common that traders make money in the morning and then give it away in the afternoon. And that's proven it's it's impatience. Impatience builds up as well as decis decision fatigue throughout the day. And

It's it's kind of a pattern of why traders tend to give money back in the afternoon. And so the idea that I wanted to go outside, I wanted to get away from the computers and spend an hour and a half or so just hiking and looking for these magnificent creatures, uh, I think absolutely contributed. That's amazing.

John, during twenty twenty, you highlighted you had some really big trades towards the end of or the later half of the year. These all seem to be in Tesla. And when we spoke many years ago, that big trade was in Tesla. What is it about Tesla? What are the unique opportunities that you've found trading this particular uh I was gonna say stock, but you're trading the options.

It's so it's it what's interesting is that it happened to be Tesla. Uh there was also, you know, a couple of really good trades like an Amazon and a few others, but but Tesla You know it's not about uh You know, it's and to be clear, like Tesla in 2022, I I don't like trading it at all. So it's kind of like uh it's it's not so much oh the stock, it's the behavior of the stock, which means it's the behavior of all the collective participants in the stock.

And what's fascinating about Tesla is that so many people hated the stock that it always had and continues to have a large amount of people betting against it. And what's great about that, it's also known known as kind of high short interest. And so what's great about that is it adds to the volatility. And so when you've got a stock like that, where there's a a portion of the population that's dedicating itself to its destruction.

Because they hate it for whatever reason. They don't like Elon. They don't like the stock. They don't they don't like the story. None of that stuff really matters to me. is that what's great about that is that, you know, when Tesla breaks out, not only do you have people who want to buy the stock as a long play, but on top of that, you have shorts getting out at the same time. So you've got that double whammy of buyers

pushing it up and then people getting out of their shorts pushing it up. And it just creates prolonged trends. You know, if you think of like say the S P 500 If you do get like, say, a 20-point rally before it fizzes, that's great. You don't necessarily expect to see an 80-point rally nonstop. But with Tesla, with this combination of a high amount of short interest um and people that just generally like to trade the stock, you can have these sixty, seventy, eighty point runs.

before it shows any signs of even wanting to pull back. And it it's just it's it's a fantastic opportunity for options because a lot of times the options they don't price in a move like that. And then from there it's just training yourself to sit through the uncomfortableness of, you know, oh my gosh, you know, I've got this much money, what if it goes away? And, you know, just kind of trailing up a mental stop that way. Right.

Well, as we're talking about big trades here, I'd love to double down on the topic. Um, just moving on from twenty twenty, the following year, twenty one. You had your biggest trade to date, uh, and that was in Google Options. So I'd love to just ask you a few questions around this. So I'd I sort of want to get as many details on this as possible.

First things first, I think the the obvious question to start this with is Knowing in advance that this is going to be a big trade, you kind of used the phrase a few moments ago, these kind of trades being available to you. How do you know when these sort of bigger trade, bigger opportunities are actually present and available to you?

So and that's a situation that I think what happens is over time, you know, being in the markets for a while, you just start to recognize and I'll see if I can clarify that. Um for Google specifically, what I recognized so this was in this was around March tenth. Um and I remember because I've I've documented this trade out, so I remember a lot of the specifics about it and I've I've pulled up a chart here so I can look at it.

So the thing that stood out with Google during this time is that the market itself was selling off. Okay. So the Nasdaq was selling off. It was taking out support. But Google wasn't. So, you know, everybody was going down, but Google was not. And Google on the daily chart was holding support. It was staying above its 21 period moving average. And, you know, it was building up a squeeze, which is one of my favorite tools. And so for me that stood out here is like this is a unique thing because

Google is very, very strong even in even against the backdrop of a weak market. And then when I started to watch the Nasdaq, the Nasdaq started forming kind of a head and shoulders reversal. you know on the daily chart and some of the intraday charts. And so my thought was in looking at this is like wow if if Google was trading sideways while the market was going down, imagine what Google will do if the market actually firms up.

Um and it's got the squeeze and you know I I that whole scenario there was kind of like to me kind of a perfect storm where you A you have a market setting up. Um, but also you have a stock that's gonna benefit really, really well from that. So that was the initial thing that I saw that attracted my attention.

When you use the phrase squeeze there, I think most people are probably gonna think short squeeze, but I think you're actually referring to one of the indicators that you use. Is that correct? Yes. So the the TTM squeeze or the simpler trading squeeze, it's a tool that's available like on Thinkorswim and stuff like that.

But what it so here's the components of it. It's not, you know, it's not a secret sauce. It just measures volatility. So what it measures is when the Bollinger bands contract to the point where they're trading inside of the Keltner channels. So Bollinger Bands, they measures two standard deviations.

The Keltner channels measures one and a half uh ATR, which is average two range. And what I want to see are what are the times when the Bollinger bands contract to the point where they're trading inside the Keltner channel? And what that means is that this market has gotten so quiet and it's been building up so much energy that it literally has to release that energy.

And so that's what so when I look for something like that, it's specifically like, wow, this thing is winding up. You know, it's coiled and ready to go. And that's what the signal is.

You know how you described when the NASDAQ was going down and Google was just not going down but sideways and that was kind of a a trigger for you. Do you use that same kind of trigger for a lot of your other trades too? Yes. So no, so so what I like to look at is I always look at the indexes first. So typically it's the SPs and the Nasdaq. And so I like to look at those and in general, like a lot of trades I like to do are just on the indexes because there's there's plenty to do on the indexes.

So what I like to look for then is that if the indexes are doing one thing, is there a stock that's ignoring? Is there a stock that's swimming against it? And to me, you know, if I'm gonna if I'm gonna trade a stock, it needs to be outperforming the indexes. Otherwise, why not just trade the indexes?

So, you know, on days when the market's down, I will go and look and see what stocks are up that day. And then you know, or uh the same thing if there's, you know, the stock market's going up or there's some are there's some stocks that are getting hammered. And it's just the idea of are there some stocks out there that have, you know, a kind of a unique story?

You know, there's, you know, one right now that that I like is there's like United Healthcare. So United Healthcare, which isn't a stock I ever traded before this year. But in in this current market where it's been volatile and there's these huge down moves, this stock just kind of keeps grinding higher. And so if I'm gonna go long something, I'm gonna go long, you know, that stock.

So I I certainly think it's you know, to me the indexes they're just like this big river and you can trade the river. But then when I like to I like to look for stocks that are, you know, I don't know necessarily the right analogy, but it's like, you know, either they're surfing the river very well or they're on the banks and they're completely ignoring it. But a lot of times I found that there's some interesting opportunities there.

Just quickly, John, you said the reason for this Google trade was In a nutshell, it was holding up while the market was selling off. Um, was there anything else to the trade? Like was there a stronger catalyst at play? Like was there some kind of news or story? around the stock that gave you the sort of conviction to really push it on this trade, to know that this was a big trade moment becoming available to you? Or was it purely just more of a technical kind of thing?

Well, there was one other piece of information there, and I knew and I knew that earnings were going to come out in about four weeks from from that. And What I found in a situation like this is that, you know, and this is just my theory, but my theory on stuff like this is that Yeah, for the there's funds out there that are really smart. They're they've hired all these analysts and they're calling the channel partners. They're doing things that us as retail traders, you know, can't do.

And I'm looking at this going like, okay, the market's been crashing. Google's at earning in earnings in four weeks. And Google's acting like the market's not crashing. Google is looks it's a textbook long setup. against the backdrop of a weak market. And there's earnings in four weeks.

Right. And so when I see something like that, yeah, it's just kinda like, okay, some you know, maybe nobody knew anything, but when I see something like that, it's obviously there's somebody buying the stock, and by somebody I mean fun. And so so when I see all that, and you know, first of course, the the chart by itself. In terms of a technical setup that I like. Um the fact that it was holding up when all the other darlings were falling apart with the with the index, that was a plus.

And then there were earnings in four weeks, because sometimes you do kind of get this nice momentum into earnings, not through earnings, but into earnings. And so those three things all kind of came together on this. Uh classic buy the rumour, seal the news. Well, I don't know if it's seal the news. Never hold through the news. Okay, cool. I'm glad I asked that question.

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I guess the next obvious thing is how did you size? Like you realize that this was a big trade uh becoming available to you potentially. How do you size for that? And how do you begin to put on your position? And and also as you're trading options, it would make sense to ask you, how do you actually structure that position too?

For sure. So I I am a fan of scaling in for this kind of stuff. And when I when I say big size, so let's um and and say it's a hundred thousand dollar account, I'll I'll look to allocate up to twenty five to thirty percent of that account into this one trading idea. So obviously there's a lot of risks in that, right? Because if it doesn't work, then your account's gonna take a blow. So you've gotta kinda so I try to structure the options in a way

um to mitigate that. Now, no matter how I structure the options, if Google releases, you know, if there's some bad news and it's down a hundred points, then, you know, it's gonna be painful. But initially I'll start off with say a 5% position. And what I do initially is call debit spread.

Um, so typically I'll buy something like say, you know, it with a stock like Google, because the options are so expensive, I tend to go out of the money. So I might buy like a slightly out of the money call. It's called a Delta forty. And then sell like a Delta 20 call. Um and I remember these were$100 wide. So$100 wide, call debit spreads, and I put it on. And I remember this because literally the day I put it on, the next day Google was down fifty points.

Now, it sounds like a lot, but with Google that's you know, that's that's nothing. Uh that's that was its normal range. Of course, this was before it split, um, just recently. And it came down to a support area. And so I added another 5%. And in this case, I added another call debit spread and then also sold some put credit spreads just to kind of help kind of finance that. And then over the next

I was holding on to it and it was just going sideways. So at this point I had about a ten percent position and I was down on it. And I was about to pack up my family and leave to Mexico for spring break. And so I had to figure out, you know, what to do. Okay. Dramatic pause. Well that's uh I mean

Uh why d I don't know, I've got in my notes here like why did you put this trade on knowing you were going on holidays? I mean, it just seems like such a big risk. So my general strategy is when I'm on vacation, especially with my family, is to not have any trades on and to be totally fly. Exactly, yeah. Um and I follow that om very religiously and

This, you know, I I always say within trading, like if you've been trading for less than five years, you gotta have a set of rules and you never break them. Once you've traded longer than five years, you still want a set of rules, but you've seen enough that you know when to break the rules. And and that's obviously can be precarious, but this was a situation where I was like, this the confidence I have in this trade is very high.

And it's rare that an opportunity like this presents itself and I need to at least keep a position on while I'm at spring break. And maybe in a perfect world while I'm at spring break, this trade will explode. And hit my target, and what a fantastic spring break that'll be. Ha ha ha ha ha ha ha. Yeah, it could either make or break your holiday.

Yeah. And and and by and during spring break it tra it was horrible. It was it traded down it traded down, I think, every day a little bit. It just it was just Uh so the irony is spring break happened and I came back. I lost money on it. I was still holding it. Um and and of course on the options. So I'm doing options that are like 30 and 40 days, 30 or 40 days out. So it wasn't like, you know, I was doing an option that expired in five days.

So that all being said, I came back from spring break. In retrospect, I sh if I would have stayed flat, I could have come back and just added done the same trade and got better prices. So but that's you know, you never know, right? But you weren't to know. Yeah.

So when I came back, I still love the trade. And so that's when I s continued legging in. And so I bought some in the money calls, bought some more call debit spreads, sold sold some more put credit spreads. Um and I built up about a 25, I think I got to about a 28% position over the following week that I was back from

And and it continued to do absolutely nothing. It was so frustrating. Like it it actually, from the first moment I got into it on March tenth, I was underwater on this trade until March thirtieth. Do you mind just explaining what is a call debit spread and a put credit spread? So most of the time, so the the basic options thing is okay, I think Google's gonna go up. I'm gonna buy a call and then if Google goes up enough, I'm gonna make money on the call.

So, of course, the thing with options, what happens is there's a lot of premium in it. So it's kind of like when you buy an option. It's like when you buy a new car.

And when you buy a new car, the moment you drive off the lot, it's got it starts depreciating. It's the same thing when you buy So the reason you do a call debit spread is you're buying this call that's gonna be losing value every day as the premium erodes, but then you sell a call, you know, that's like way above where you think the stock's gonna go. Assuming that that call is gonna go to zero And that helps to offset. And and the reason I was able to hold on to these trades for this long.

is that even though I was down, it wasn't horrible because the spreads were structured in a way that, you know, they were kind of kind of neutral. So yes, I was losing money like almost every day on this trade, but it wasn't all The the theta, the way I structured the options was that I I could afford to sit through essentially what was back and forth for three and a half weeks. Okay.

Were there any important factors during this trade which kind of confirmed you were right as it started to play out? Like were there any'cause I know you kinda got into this trade really before it it broke out, if you will. Like once it did start to work, what were some of the signs which you saw which kind of confirmed to you that it was working? Obviously, other than prices going up.

So yeah, you know, and so as I was so during those three and a half weeks where it was trading sideways, you know, the first thing I always was just say, like, okay, is the setup still valid? And it was yes. There was at no time was the setup not valid.

It was just really annoying that it wasn't doing anything. And I was, you know, and I've been trading long enough to know that just because I really like the setup, in no way, shape or form does that mean it's going to work. I was just like, Man, is this thing really gonna break down? Um when I knew I was in good shape was I think it was March thirtieth. I'd have to probably double check the date, but there was a day when

Um, the stock had a really solid rally on volume and it took out all the resistance of the prior three and a half weeks and closed at its highs. And I was like, bam, all right, this show is gonna happen. And the next four days it rallied every day. And there was one day where it rallied like a hundred points. It basically went from like almost two thousand to um, I think twenty three hundred dollars, you know, over the course of five days.

That's amazing. Something I noticed when you were on vacation and Google was going down and you were losing money, you could have just closed out of the position, but you didn't, right? I think I read somewhere where you mentioned that you had the confidence to stay with it because nothing was wrong with the setup. And I think that's a key thing too because that's where a lot of traders may lose the confidence and You know, with that kind of you know, that

But the stock going down that much would have probably closed out out of fear. And I was just, you know, trying to understand what was going through your head. Yeah, yeah. So so first of all, you know, when you're losing money like that every day, you're certainly second guessing yourself. You know, it's just like gosh, you know, well you know, is this but there but there's two things with this that I and I've learned over time.

is and I c it's like I call it the true false statement. And if the reasons you got into the trade are still true. There's no reason to get out because when it works, you don't know when it's gonna work. And there's certainly been times when I've had a perfectly good setup. You know, I was like, Oh gosh, it's not working. The last week it's you know, it's oh I'm down money, you know, wham, wham, wham.

And so I get out and then the next day it takes off. And then when it takes off psychologically, it's actually hard to get back in because you're like, Wow, I was in at this price and now I feel like I'm chasing. And so you can end up missing it. And so the first thing was is like A is the trade is the reason I got in this trade still valid, yes or no? And the answer was unequivocally yes. So there was, you know, nothing had broken down.

Um, you know, it just wasn't taking off and it was coming to the bottom of its range. And then and then the second part of it was going like, okay, if I knowing how strong this setup is with everything we've talked about, if I cut bait. And then the stock does in fact turn into this huge move that it has the potential to do.

Um, I would be doing myself a disservice by succumbing to my own fears. And there's this thing about the idea of being unc being comfortable with being uncomfortable, but but also focusing on the fact. If you if you're if if the trade is breaking down, then yeah, if you're staying in it, that's a whole different psychological reason. You know, that's like, oh, I'm afraid you know I'm afraid to take a loss and all that kind of stuff.

But if the reason you got in the trade is still valid and you know you're within the you know the risk parameters that you set up. then there's absolutely no reason to get out of the trade. Um maybe, you know, if you're nervous, you could say like buy some puts on the cues in this case, just like, well, if the market really tanks, at least that way I'll have a hedge.

But it really comes down to that. And you know, if if the reason you got in, nothing's changed, then you just gotta be patient and sit on the horse, you know, and let it do its thing. And that takes practice. Uh absolutely. And I'm I'm first to say that it's you know, it's funny in trading, it's not learning a setup is not hard. Learning to manage your, you know, internal dialogue and your emotions while you're in a trade is hard.

So just coming towards the end of this trade, let's talk about the exit. What triggered to you that this is the end, I'm getting out, I'm going flat, locking in my profit. Yeah. So the so one so one nice thing about when you're so we were talking about call debit spreads earlier.

So I remember the way I structured these. It was something like, um, you know, I bought the two thousand one hundred and fifty dollar call and then I sold the two thousand two hundred and fifty dollar call. So on a lot of those, you know, they were$100 wide. So Google went from about two thousand to about two thousand three hundred over the course of five or six trading days across, you know, all these positions that I had.

So um there's a couple of things is first when it kind of blew through the upper end of my call debit spreads, at that point there's not really a lot left. So, you know, your your potential for additional profit at that time. Um, you know, I basically I c I basically capped my profit. I mean the trade would have been bigger had I not done

Call debit spreads. But on the other hand, I don't think I would have been able to hold on to the trades. Um, because if I would just if I was just sitting on straight calls, I would have incurred more losses. So, you know, it's it's kind of six of one half a dozen of the other. But but the other part of this is that um in terms of a target

I'm a big fan of average true range. And so on a daily chart, I'll just put on a twenty one period exponential moving average. And anytime a stock moves three ATR, so in visually on your chart, you know, you just put on a Keltner channel, um, change the input to three, you know, three ATR. It's very rare that a stock's going to blow through 3 ATR. So if you can go from the 21 EMA to 3 ATR.

90% of the time, that's all you're gonna get anyway. Uh it's just from there the odds of it starting to pull back are really high. So so the combination of things happened. One, it got into that three ATR level, two, it kind of blew through that upper. um options, you know, the upper options that I sold. And um, you know, at that point I think, you know, I'd gone from being down um, you know, very high six figure.

to um you know that on that particular day, it was the day I started exiting was up just is like five point one million dollars. I mean it happened so fast. And which is what I love about, you know, options like that. And and so what I did is I started selling out um the long calls first. Okay, because those are the ones that were at the most risk if suddenly Google decided to Uh pullback. So get rid of those.

And then I gave a little bit more time on the call debit spreads. I think like later that day. I closed those out. And then the put credit spreads that I sold and you know again for people that are in that aren't uh familiar with options. So I would sell put credit spreads, like say I would sell the two thousand dollar put on Google and then buy um you know like the nineteen hundred dollar put and that's a spread. With the the bet being that that's gonna go to zero.

And since I sold it, um, that means I collect the money. So those weren't big trades because put credit spreads you don't get a lot for, but what they did is they helped to offset um premium decay, like on the long calls. So I just let those expire. Uh'cause they you know, they had another week of life left. But um it all happened very, very quickly. And um and I do remember, you know, I think

doing like a workout that day and I just had my iPad right in front of me the whole time. Like I am not risking this thing, you know, you know, r you know, reversing, right? It's just like that's it's a on a trade like that. So it was a it was a uh yeah, it was a really It was a crazy trade. It was amazing. And um and and I and I took about three day three or four trading days off after that just to kind of, you know, come back to uh come back down to Earth.

That's probably a smart move. Were you out before the earnings announcement? Absolutely. Yeah. So I never hold through. Yeah, I never uh it's just it's such a you know, it's such a crapshoot. I'll if I do an earnings trade, it's more based on uh, you know, the implied volatility essentially getting crushed, which is a whole different trade, but uh I Hold I've never found a consistent way to make money holding through earnings. And so I just I stopped doing that years and years and years ago.

Gotcha. Uh well for anyone listening, um John has done a really good breakdown of this trade even further uh in a video which is on YouTube. So I'll pop a link to that in the notes.

Given that uh, you know, most of your trade setups are using uh options, John, do you think it's a myth that trading options is riskier than trading stocks? Okay, so I don't actually don't think it's a myth. I I think that it's easier to trade stocks um if you're doing directions. So if

So let's just use the spiders as an example, SPY. And if you're trading and it comes down to support and you buy a hundred shares, you know, at you know, three hundred and ninety and it goes up to three hundred and ninety-three, then you know, you made three hundred bucks. you could do on that same move Uh do the wrong option play.

And lose money. You know, it's like, oh, I'm gonna buy this out-of-the money call that expires today. And it just the spiders don't move enough to impact that call, and you actually end up losing money. So I I don't think it's a myth at all. I think trading stocks is absolutely tr easier than trading options, but there's a point at which you learn enough about options.

where it's hard to go back to stocks because there's so much flexibility in options in terms of being able to, you know, I I think one of the my one of the best bets. in options trading is making bets where something's not gonna go. It's like, wow, I really don't think the stock's gonna go to here. So that's when you can like, you know, sell a spread. Yeah, I would say starting off

I I would absolutely trade stocks first because the way I look at options I and I don't really look at a lot of the Greeks. You know, there's the all the gamma and all that kind of stuff. And and I understand it and I get it. But I was trained directionally. So I trade them directionally. So, you know, if I'm looking, if I think something's gonna go up, I'm gonna do an option strategy that would benefit from the stock going up.

versus, you know, looking at all the all the Greeks and trying to, you know, establish some type of trade that would, you know, okay, if if gamma expands here, I'm gonna make some money. Uh yeah all that stuff is good and I'm not I'm not knocking it because I know traders who study they they religiously do that and they and they make a good living doing it. Um it's just that my background was direct. And so I I utilize options as a way to enhance directional movement in the stop.

Could you have had the same performance trading Google trade, uh the Google trade that you did um with just purely trading stocks? Could do you think you would have had similar a similar you know performance outcome or different. Okay. So so it's a good question. I would have caught the same trade and I would have made maybe a hundred thousand dollars.

So that that would be the difference just because of the leverage. So so Google's a two thous a two thousand dollar stock, right? And so let's say I buy um, you know, whatever, a thousand shares. Okay. A thousand shares, that's a two point that's a two million dollar position. And the stock goes from two thousand to two thousand two hundred and fifty. And so I make two hundred and fifty thousand dollars.

So the only so so it's the same move. It's just that with options you're just able to get more bang for your buck. So I could trade um You know, so where I as I was trading, say, so instead of trading the equivalent of a thousand shares of Google, you know, with options, I was trading the equivalent of like 20,000 shares of Google. And um so when it really goes, it's you know, you really get to see that impact. Yeah, I mean options it's it's amazing. Um it's obviously really um

And there's just a lot of uh moving parts and so many strategies. You know, to someone who's not familiar, it could be really, you know, daunting uh at first to learn it. But I think for those who, you know, don't understand options trading yet, I mean, I would highly recommend um learning about it at least. In order to, I think, trade options, you should learn how to trade stocks first.

I I think so too. And and here's the the thing with options, if there's a secret options, is that any book you read on options is gonna overcomplicate them way too much. Uh and I get it because there's a lot of people out there that are very smart that trade options in ways that I never would. And so that doesn't mean that what they're doing is

It's just not my style, right? And so um double diagonals, uh, you know, fifteen winged butterflies. I mean, I'm kind of making up some names in that case, but there's a lot of complicated things. that if you want to go down that path, you can. But if you start off trading stock. And then you just want to utilize some option strategies that mimic stocks. There's only three, three, three things you need to learn.

So in an up move, it's like, okay, I I wanna buy a call. So typically for me I wanna buy an in the money call. I wanna give it, you know, like thirty days at least um till expiration so you don't get killed on Theta Decay. And or you could do a call debit spread or you could sell a put credit spread and that's it. And then for a down move, it's okay, I can buy a put, I can buy a put debit spread, and I can sell a call credit.

And that's it. And once you just learn that, um, the nice thing is is almost every other complicated option strategy is just a combination of those anyway. So I I like to keep it pretty simple. That's all I'm honestly that's all I typically I do. It's very rare that I do um other types of option strategies. Um but it's it's worth it to learn like, okay.

What's it like to buy a call? What's it like to do a call debit spread and sell put credit spread? Great. You're you're good. Once you got those down, you're you're good to go.

Mm-hmm. Yeah. And another thing you mentioned, two jobs or one of the jobs as a trader. is to pay attention to your equity curve, an upward sloping equity curve, starting from the lower left and going to the upper right. And also to To kill a trade when it's not working. It sounds so simple, but so hard to do.

It you know, it it's hard to do when your unconscious takes over. So and I've I've looked at this a lot and I've looked it's just the idea of like, you know, looking back at times when it's like, why was this hard to get out of? Um and there and this is this could be a much longer discussion, so I'm gonna keep I'll keep it as short as possible, but there is

Something in us that takes over, like literally, when we get in uncomfortable situations. And this carries over from childhood. So in childhood, we learned we all had different childhoods. You know, some were some are a lot tougher than others, but as a child, we have to learn how to navigate, you know. And a lot of times in in childhood, the survival skills that we we learn to navigate childhood and be safe and grow up, they do not serve us at all as an adult. And um

And so when we get uncomfortable as an adult, what happens is that these same essentially programs at this point that got us through childhood, they literally take over. And so anytime if we're in a situation like a trade and we're freezing. Um and we're not following our plan, that's what's happening. And it's in and the way to avoid that and the way around it is to get present. You know, to close your eyes.

uh do like a five minute meditation where you're just counting, you know, just something to kind of dissolve all that and then just get back to being objective and like, okay, this trade's not working. And yeah, it's it sucks that I'm taking a loss here and and, you know, I feel all these bad feelings about it. But the moment you take that loss, you feel a thousand percent better because now you're back to new.

Um one of my mentors is telling he drilled this into me and he's like, Okay, John, what's the difference between a you know, a thousand dollar uh loss on paper versus a thousand dollar real loss. And I said, Well the th if the thousand dollar loss is on paper, you have a chance to get it back. And he just he screamed at me. He's like, no, there's no damn difference.

If it's not working, get out because you think that, you know, there's a chance it can come back to even, but you could actually just go into a new opportunity where you could actually make that same money instead of hanging on to all the psychological baggage of trying to get back to even.

And it it really hit me and it's just kinda like the, you know, the way a market maker is trained is that small losses are good, you know, and if you're in a trade and you're losing money, you're wrong. And just take it and there's no emotion around it. It's your job. As retail traders, we learn to analyze. And so if something's not working, we start to question well, geez, is our analysis wrong? You know, versus like, you know, this is a probabilities game.

So it there's a lot to unpack there, but that's the short answer is that we we you know, we do wanna be mindful and to the extent that we can be present and mindful and not kinda let our survival strategies from, you know, childhood essentially take over our body. You know, that's how we when we get triggered and stuff like that. That's kind of, you know, how we react. Um, it helps a lot.

And it's a lot to be aware of during the day, but it's you know, it's real. And I think it's it's probably causes more problems and trading than anything else. Yeah, I love your your holistic approach to trading. I think that um it's something that, you know, we as traders Probably don't, you know, spend as much time, you know, focusing on. Um, I mean, it's been said that trading success is 80% of.

eighty percent psychology. Um, do you believe that that's true? And and and if so, why does it seem like Why does it seem that in the trading world, there's not the same amount of time and devotion to focus more in this area, you know, to help the mindset for trading? Yeah, it's it's a really interesting thing because in the beginning when I started off, of course, I didn't think that at all. You know, I gotta find the right indicator, I need to find the right setup.

Um and what I found is in as I graduated to kind of teaching stuff is that I I could show someone the exact same setup that I'm using and they would execute on it totally differently based on their psychology. I didn't it took me a while to kind of realize. The way around it, of course, is if you trade 100% mechanically, like you just program it, you have your computer do it, then it's not a problem anymore. Then you don't have psychological problems.

But a lot of us, myself included, um, you know, I like to trade discretionarily uh for whatever reason. Uh there's but it's um but the idea is once we get clear on what I simply call a high probability moment in time. Meaning that, you know, say you got a checklist like, okay, when these three things come together, I'll I'll go long. And when these three things come together, I'll go short.

And, you know, here's my criteria for knowing that it's not working. And then here's my target criteria. To the extent I'm following that and I'm present to that, it's fine. Where we get in trouble is that one time when we see some stock racing and we get FOMO, you know, fear of missing out, and we just chase it. Oh my God, there's GameStop. There it goes. And at that point then

psychology does take over. And or we could be in a trade that was well planned and well thought out, but we wake up and there's this big gap against us. And like we kind of freeze. So that's where the psychology comes in, because if we to the to the extent that we are not following our plan is the extent to which our psychology is an issue. And you know, if you wake up and the you know it's gapped against you and it's through your stop and you spend the remote

coming in hind and wondering what to do instead of just getting out, that's all psychology. That's a thousand percent psychology. And I think that's the that's the part to really get our arms wrapped around is that when we've reach indecisions, Um it's a psychological thing and it's it's always going to be there, but to the extent that we can be aware of it is the extent we can also overcome it.

So it's kind of like um like I interpret this as how we trade is is a reflection of of who we are and how we approach life and and how we deal with things. Or is that too extreme how I interpreted it?

No, so no, I love that. I would I would add I would add something to that. There's a quote I heard is that we don't get what we want, we get who we are, uh which is brutal, right? And uh but to an extent, um how I interpret that is A lot of times what we what we're getting and managing is a lot of what's happening, uh you know, again, we could really dive deep into this, but

Uh it's more unconsciously. So why, you know, why does something make us mad? Why does something put us into fear? A lot of times we don't know. It's just that our body is kind of reacting to it. And ninety percent of the time, at least from the research I've done and the experiences I've had personally,

It's all, you know, hardwired survival skills that we learned in childhood. And, you know, they think they're still helping us, but they're not. But it it is a holistic approach. And, you know, there's

You have to be careful because if it's it's one of those things where if you go to a Tony Robbins, you know, talk and it's like, Okay, visualize your future and it will happen. Well, if just because you're in a trade and you visualize that it's gonna be a winning trade does not in any way, shape or form mean it's gonna be a winning trade.

Right. Um and that's in fact the worst thing you can do. But I I think in trading you wanna be it's a combination of be positive that trading is a skill that you can learn. But have a lot of doubts that the next trade you're going to do is gonna actually work out. And so then what happens is you start focusing on risk control, right? Position size.

And um yeah, it's a really fascinating thing. I do think that, I mean, to me, the market is the best psychologist in the world. You know, are you being true to yourself today or are you being a slave to your, you know, emotions and survival skills?

Thoughts on uh how to approach the market for the remainder of the year? Prior to this year, I was always kind of like I I used to day trade. Um, you know, I guess in the you know, two thousand four, two thousand five, two thousand six, I was primarily a day trader. And and that was a function of, you know, just trading full time and I just, you know, it was fun. And then, you know, I I really prefer swing trading, meaning find something that you like.

put a position on and and and hold it for a couple of weeks. And um this current market that we're in, I hate swing trading. It just it's just there's so many things that could that can go wrong. And I'm I'm back, you know, back to day trading. And so I think in this current market, I really, really, really like the SPX. They have options that expire every day now. So, you know, you can do things like sell spreads, um go directional and things like that too.

But The I I would say that the biggest difference in a market like this is that in twenty twenty and twenty twenty one. The ground was there for the potential for big trades because we had strong indexes. And within that we had strong stocks. And so it was something where it's like, yeah, let's see if we can find the next big trade. This kind of market is let's try to make two and a half percent a week.

So, you know, with combination of, you know, option strategies and things like that. And so it means, you know, not taking a ton of risk. Two and a half percent a week doesn't sound like a lot, but at the end of the year that's, you know, it's if you don't wire any money out, that's something like three hundred percent over the course of a year.

Um and it doesn't mean it's gonna work every day, but it just it helps you set the guidelines for risks and stuff like that. And so I would say, you know, you know, the market that we're in is that it's a um It's a market that's designed to be dream killers for both people on the long side and the short side. It's going to destroy both their dreams. So it is about quicker trade.

Um, you know, maybe trade may you know, if you're gonna hold a trade longer, you know, maybe overnight for a day or two. But it's just understanding that this is a it this is a market that's trying to find its own footing. You know, it's like, wow. You know, is the Fed going to crush the economy and is it going to destroy tech companies? And so there's a lot of back and forth. It's not this relaxed.

trend that we all can just flow into. Um it is more of a, you know, for lack of a better term, it's a trading market, not a not a buy and hold market. I love how you highlighted that. This market environment is perhaps better suited to day trading rather than swing trading and that you actually have the ability to kind of switch between the two. I guess uh, you know, that's probably one of the things which has kept you in the game for so long, right?

Yeah, it's well and part of this is that you know you in in in trading, like you learn everything the hard way. And so you by the time I figured out this was a good day trading market, it's because geez, my swing trading is not working.

So it's not, you know, it's not like one day waking up and going like, Okay, today is the day we start day trading. Um, you know, but it is paying attention and I do always pay attention. Like I like to track my trades. And if it's something like Man, you know, if everything I'm touching turns to garbage, and you know, and I and I've done this long enough just to realize like, okay, it's not necessarily me being a bad trader, but it's me trying to impose

a strategy on the markets and that market is no longer there. You know, the market has changed and I just haven't recognized it. And so that's the the, you know, the easiest sign that the market has changed and is that it's like the stuff that you're doing is not working. And then it's like, Oh, okay, great. What are we doing here? And um, you know, and just diving into that and ha and having that flexibility. John, just one last question here.

Uh, and then we'll we'll close it out. But when you said before wiring out two and a half percent each week, it just reminded me of something I read in that article uh you wrote. Uh and that was a summary of your year in twenty twenty, which I'll absolutely link to in the show notes'cause it was a a good and very, very thorough read. I don't know how long it took you to write that. Yeah.

You say that you when you wire out your your funds, um, a certain portion of it, you ensure that you allocate it to tangible assets. Can you give an example of what some of those tangible assets might be? Sure. And and for me, and it's it could be different for everyone, but it's for me, so a tangible asset has serves two purposes. One, um

Well, maybe three purposes. But one, you know, you are essentially taking money that you made in the markets and you're putting it into something that's a little bit longer lasting. Okay. So for me, a primary example would be really. Uh you know, the idea of like taking some profits, putting a down payment on a rental property, um, you know, like we've Airbnb some properties and things like that too, or or or whatever it is. But it's just it's it's taking the money out of the market.

and you know, just putting it into something like that. Um I also uh, you know, bullion, even though bullion isn't really that exciting, you know, it's kind of like the new stable coin. It doesn't really move. Um rare coins. I I've collected rare coins all my life. And so, you know, that things like that that I think are kind of fun. So the and the reasons for that, the other reason for that too is that we're all gonna have draw.

So let's say that, you know, you have an account at$10,000, you run it up to$100,000, it's amazing. And then you just get into this, you know, you don't adapt to the markets or whatever happens and it goes all the way back down to ten. That's really disheartened.

However, if during that time you were wiring money out and you were buying real estate and gold and silver and rare coins with a portion of that, if you do have a nasty drawdown, it's like, wow, at least I was able to turn some of my profits into tangible assets. And then the last part of this is that when you have a tangible asset like real estate or, you know, gold bullion or rare coins, they're hard to sell.

Like you can't on a, you know, the danger of a market is you can do, you can really get impulsive, like, oh, I gotta buy that. But if you want to say, man, I need some money. And you can't right click and sell your real estate. You know, it's it's a decision. You need to get a real estate agent. You need to go clean it. And the the fact that you have to do all that work just to sell it often will dissuade someone from selling.

So it helps keep you it, it just basically you just have assets that are, you know, not necessarily easy to get rid of. And and I think that's a really good thing. Just in the markets, we c we can do so much with the right click of a mouse. And by turning some of our trading gains into tangible assets, it's a way to kind of save ourselves from ourselves as well.

فشا So our next episode will be titled Uh John Carter's Guide to Real Estate. How to how to uh how to raise zebras to increase the uh price per acreage for your neighbors. I like it. I like it. All right, John, we're gonna let you go and enjoy the rest of your evening. Thank you very much for coming on the podcast. It was uh nice to catch up with you again and I'm sure uh Tessa enjoyed uh chatting with you. Yeah. Uh, thanks for letting us pick your brain.

Yeah, no, it was great. No, thank Aaron, it was good to talk to you again and Tessa, nice nice to meet you and and great questions and always a good conversation. Excellent. Thank you so much. If someone wants to find out more about you, John, uh where's the best place to go? Twitter, et cetera. Yeah, so um on Twitter I'm just at John F. Carter.

And uh our of course our our site is simpler trading. And we've got a you know, we've got a bunch of trading services on there. The one that I'm in is in is called the Options Gold Room. And so that's where I do, you know, like the Google trade I did, I was posting that and answering questions and People are asking me, you know, why are you still holding on to this? It's, you know, it's down and, you know, that that whole thing. So that's where I but that's where I post the trades that I do.

Okay, cool. We'll pop links to that in the show notes. Until next time, John, uh take care. Yeah, you guys too. Take care, John. You've reached the This episode of Chat with Traders. But rest assured, there are more episodes of the show. updated with each Love it if you leave our- We'll catch you next time.