We’re lucky to have Optionswire as a daily presence in the Steamroom. He’s a beast of a trader, and as you’ll see below, he’s learned valuable lessons the only way one truly can: experience.
Thanks to him for doing this interview. Enjoy!
Tell us a little about yourself and your background.
I was born in Hong Kong but moved to California when I was very little, 5 years old. I’m bilingual but I have a huge hick accent in my native tongue of Cantonese. I’m pretty sociable but also a self admitted nerd…I played a good amount of sports growing up.
Typical Chinese kid, steered into math and engineering. I dissented and went into political science before finally double majoring in economics and business administration.
I had a variety of hats in my former career from being a broker, securities principal, running an OSJ, and managing a small team of brokers. I quit in December of 2015 to trade full time from home. I thought I was quitting just as the market was going to break out into a monster wave higher – instead, by mid to late January, I began to wonder if I literally timed the exact top of the bull market. LOL. Kids, don’t quit your day job because you think you are going to foresee what kind of market regime is going to unfold in front of you…you don’t know and your best expectation should be to just be flexible and open to whatever the market is going to give you, period.
Its ironic because in my prior line of work I often spent much time convincing people NOT to do what I ended up doing! LOL
When and how did you get started trading?
I started trading with my dad in high school and college. I remember powering up my G3 PowerBook with this stupid stock app with 15 minute delayed quotes and having it run all day so we could check stock prices. Delayed quotes, LOL.
Will never forget the thrill of riding RMBS through a 4-1 forward stock split and subsequent 50% bump in price over the course of a few weeks. I was hooked.
I also remember riding Philip Morris (Altria to young guns around these parts, lol) to a nice profit that allowed me to buy my then GF a nice wedding ring. Maybe the best investment I ever made (hopefully my wife agrees!).
How do you trade now? I.e. equities vs. options, time horizon, based on flow/technical analysis…
I trade options and futures.
For futures, I am day trading ES and using stat work. I work with a trading mentor (FIND ONE, latch on, don’t be shy – but don’t ask dumb questions – I, for one, find that many, many, many successful traders are very, very generous with their time if you have a solid foundation).
For options, I am swing trading chart patterns in the basket of stocks I watch closely. Even this has been changing quite a bit for me lately as I am realizing that so many chart patterns are very subjective meaning it is hard/difficult/impossible to build a true system around trading a falling wedge breakout because another trader might see a diamond reversal pattern. Or whatever.
One of the ways I think I combat that is I trade a pretty tight basket of tech stocks…things I know and understand and have watched…for years. There is nothing that can replace the experience of years of chart watching.
I use the Steamroom/options flow in the names that I know very well to serve as confirmation (on both buys and exits). I don’t just chase any random flow…has to be a name I know with some conviction level cash behind it and also in context (I avoid all ER trading so ER season flow is sometimes just one sided betting that is not predictive).
It’s a cliche, but trading is or should be about knowing the odds and executing your plan according to those odds. Just like a professional poker player knows exactly what kind of odds he is looking at based on the flop and the hand he holds…so also should a trader know what kind of odds he is looking for in a trade. Based on that information, you then bet accordingly and understand that if the odds are in your favor, even an unexpected outcome (loss) you just simply move onto the next occurrence or set up and ante back in. If they are real majority odds, you are systematizing and will win if the stats bear out.
If you go into a trade with no real idea what your odds are, at the very least I hope you are being a permabull and drifting with the general direction of the market…and go back to the drawing board and figure out a way to define the trade specifically so that it can be measured!
The more information you hold, the better off your conviction level is going to be that will let you hang onto trades that can be big winners.
When did trading “click” for you– is there a story you can tell of when you suddenly “got it” (or something important clicked)?
When you stop trading every day…or you can let hours melt into days where you don’t trade at all…FOMO is the worst trading emotion out there. This market is here almost every damn day. New opportunities emerge. Everyone is gonna get their opportunity.
What’s the hardest thing about trading for you?
Patience can be tough.
I’ve got a million ideas and I only try to execute the best ones. And it can be tough to discern that sometimes. There are a lot of inputs to consider…is it the right sector? Right company? Is the market trending the right way?
There was a great Chat with Traders episode with John Carter who discussed looking at chart patterns; the best set ups should leap off the page and speak to you. If you’re staring at a chart for a few minutes you are most likely trying to squeeze your bias into some kind of pattern. They usually are pretty obvious.
There can be a lot of monotony too. Most of days the market is contained within 10 handles of ES range. There is a lot of chop. Don’t overtrade out of boredom. When you are bored, fire up some trader podcasts, absorb information, keep yourself busy without micromanaging your ideas or trades.
Also, engage! Find a trading community somewhere. Talk converse, pass the time, bounce ideas off each other…the Steamroom is a great place for me to interact and not end up in a trading bubble, especially during times of massive monotony.
When you look back on your career, what were some of the biggest learning moments for you? Either from losses or gains, or watching someone else…
Losses, all day, every damn day.
Wins don’t teach you shit and stringing together a bunch of them makes you reckless and overconfident. There is real meat in the losses though because it’s an unexpected outcome.
Dissect every single one…no one goes into a trade expecting it to lose. Your bias is built in when you smash that buy/sell button.
How do you keep your head on an even keel? How did you learn to do that?
Hookers and blow.
Oh wait a serious answer? Just the blow then. Or weed. BLEM.
Editors note: he answers this pretty thoroughly in the last question.
What was the worst single day of trading for you? How did you bounce back from it?
I don’t have a single day in mind but I remember quite vividly being on vacation in Turks and Caicos. I was riding a pretty big option position in TWTR that I had planned to close out BEFORE ER that were emerging after the bell.
Instead the ERs leaked and I saw a solid 150% gain vanish into a 100% loss. That…sucked.
Then in that same week and still on vacation, I made a decision to let some AAPL calls ride into ER that I had solid 200% gains in and it tanked on ER and I lost 70% of that investment.
All this is to say…you always need to be prepared to get punched in the mouth at any moment. The worst punch is always the one you don’t see coming.
On TWTR, it was simply an aberration that I could not unfortunately avoid. I had mapped out my plan of exit and it did not mean a hill of beans when that ER report leaked during market hours.
On AAPL however, that was something entirely different. Anyone that’s seen me posting has likely seen how often I tell people NOT to trade ERs. It’s a totally binary event that you have no control over and that is not the kind of trading I think can ultimately be sustainable long term. Even if I gave you the ER number and the guidance number you have no real way to know how the market is going to react to the information. And often times you are positioning yourself for ER with a ton of confirmation bias based on the bullish or bearish move you are expecting.
In other words, you are way, way too biased already.
This is a situation where you can avoid being punched in the face…so why put yourself out there with an ER report that you have no liquidity to get out of and a totally unknown response that is a binary guess?
Don’t trade ERs. My consistency as a trader jumped huge when I gave up on being a degenerate gambler.
Okay, now tell us your juiciest trade story… that right place, right time, right everything trade…
I’ve had several 6 figure trades, but some people here may remember this story where I happened to be in the right place at the right time on LNKD.
I was trading it based on its chart and a potential gap fill. This was obviously after it had a huge melt down on a totally unexpected growth miss. It took months to rebuild accumulation then suddenly was bought out by Microsoft for a 45% premium.
I was in an airport traveling to Cleveland for the GS-Warriors, game 4, NBA finals…I was at a gate for my connecting flight and got a CNBC alert that LNKD was acquired for 195 a share by MSFT. I even vividly remember checking into the Steamroom from my phone to ask if this story was even true.
Needless to say I had never been so happy to pay 15 bucks for inflight wifi to close out my trade within 30 minutes of the open.
I made well over half a million bucks on that trade (from a sub-$40,000 investment). Some OG’s will remember that craziness.
What’s the best part about trading for you?
Total freedom. This is the best paying job in the universe. There is no other marketplace where you can jump in, use monster leverage, and extract maximum financial reward in a minimum amount of time.
Any words of wisdom or advice for newer traders out there reading this?
There are a few things I think every trader should know.
A.YOU AIN’T SHIT.
No, seriously. Everyone quits a job to trade full time because they think they unlocked something special in the market that can be constantly repeatable and profitable. Unfucking likely…you may just be riding a huge lucky streak (and that can last even a year plus) but just know who you are in this jungle.
You are basically the smallest capitalized, slowest responder, and least informed combatant in this entire marketplace. You think you have more liquidity than GS? Renaissance Technologies? JPM? Appalossa? You think you have more speed then HFTs that literally set up their software and servers on the doorstep of the NYSE? You think you have better research tools then a 10 billion dollar HF that has an army of analysts plowing over little pieces of data you had no idea to even check for?
They’ve got 25-year-old Harvard students analyzing satellite data of the number of trucks leaving production plants…you think you can compete with that because you think some company isn’t trading at the proper price to book value?
So check whatever ego you have at the door in-between these chalk lines…because you are NOT shit.
However, that doesn’t mean you can’t make really good money doing this. My trading mentor put it to me like this…be a remora.
Do you know what a remora is? Its that little fish that hangs out with a shark and just attaches itself to its under belly and drifts with the big player. Be that guy. Ride the incoming or outgoing tide of the market. ALWAYS be a stubborn bull because you should know the natural drift of the market is always up. Watch what your inputs are and check your human nature that innately seeks confirmation bias.
B. You must practice total honesty with yourself if you are going to succeed at this racket.
That means you must write down every trade, every idea, every emotion…trading is the ultimate journey of self discovery.
You think you know yourself? You will discover new things and emotions about yourself in the crazy uncomfortable places that the market will take you.
And NO TRADER will not have the ecstasy of victory and the agony and pain of defeat.
Journal all of that down DAILY, without compromise because it will help you understand yourself, build your understanding of your emotional profile, and allow you to trade in (hopefully) a way that maximizes your emotional strength and avoids your emotional weakness.
If you discover yourself making rash, impulsive decisions based on every tick of the market, then maybe you should design a system that only looks at closing prices to avoid information overload. If you find you have total robotic discipline to taking profit targets and cutting losses maybe you are well suited to be a day trader.
Whatever your niche, your role, or your emotional makeup, there is an opportunity for you to craft a unique way of succeeding in the market.
But only if you are open and honest enough with yourself to explore it. Use Evernote…use google docs…but write it down. Daily. Without fail. Congratulate victory, dissect losses, and unpack all your emotional highs and lows.
I mainly trade tech names. I watch them hourly/daily and I am intimately familiar with their set ups. For names or sectors I don’t understand as well I use diversified investments like ETFs to get exposure. I know guys that can pick out little small cap bios and ride massive gains on ’em. That just ain’t me, but I can trade IBB/XBI and be a remora to some other shark riding a small cap to a huge winner.
KNOW THYSELF – I didn’t arrive at that conclusion by happenstance. It took pain and a lot of journaling to unpack that. Now if you’re asking me about FB, AAPL, GOOGL…yeah, that I can ride for sure because I know those names intimately.
Use options flow to confirm some of this action if appropriate, don’t just blindly chase any flow candidate. Analyze it in context of the trend of the market, the timing in the market, and the amount of conviction (premium paid) behind it.
D. What’s the fucking rush guy?
I’m guessing the people reading this are mainly slinging options around. If you have a little bit of experience on options and have been around the block you should know these things are like an accordion: inflating and deflating with the rhythm of the day.
I always piece into options slowly, and my long-term swings may have several pieces I add onto. If it immediately moves the way I was expecting, well, I won’t have my max position on but I’m exposed, and it is what it is.
But I ALWAYS leave room to assume I bought the high. That is literally my attitude going into every option trade. Give yourself wiggle room.
E. Protect your emotional capital.
Trades and ideas are like relationships: they bake, they gestate, they form, they wear out their welcome, hang around too long, and it becomes a nightmare.
EVERYONE can identify with that relationship that just hung on way too long and wore you out. Not ONLY that, but ended up making you gunshy on all future relationships. That painful memory, that big lightning bolt of regret.
Some people keep trading that one name that made them good money on the run up (AAPL, GILD, cough cough), like drunk texting your ex at 2AM. Move on, bro. Sometimes it is just way better to harvest a crappy loss, release your mental burden, and move onto the next one.
And there ALWAYS is a next one.
Good luck, I’m rooting for you.
Thanks for reading, and don’t forget to check out the Sang Lucci Master Course. Get 33% off up until June 5th at 8pm ET.
Share this Post