Part 4: ‘The Road To An $18.2 Million Year’

2021-03-18

Article Note: This year has already struck a nerve for many traders after surviving the previous 12 months. At this point, many traders are reflecting on the first quarter of 2021 and maybe taking some time off for annual spring break adventures.

At Simpler Trading we strive for a strong, continual work-life balance. So, for this week we are going to offer a reflection on lessons learned in 2020 and what that offers for the rest of this year.

Our reflection centers on the 2020 year-end trading journal summary written by John Carter, Founder of Simpler Trading. We separated his summary into five daily sections which we will post here as our daily article.

Let’s take a look at Part 4 of “The Road To An $18.2 Million Year:”

June, 2020

  • Starting balance: $1,646,436.00
  • Ending balance: $3,155,005.00
  • Money wired out: $200,000.00
  • Balance if no money wired out: $3,355,005.00
  • Monthly return: 103.78%
  • No additional stats

The biggest change in June? I got a fast internet connection out in the country. Instead of trading off 2.5MB spotty service, we finished construction on an 80-foot tower and I now had 50MB up/down internet. Huge, huge difference. Getting fast internet out in the country was a two-year project. We are starting to offer the service to our neighbors as well. 

With the faster internet, my trading started to improve. Then, on June 13, after grinding it out for six weeks, TSLA teed up for the first million-dollar trade of the year. At that point I also changed my auto wire from $25,000 to $62,500 per week. This wire would go out every Thursday morning, automatically, whether I made money or not. I also decided to start resuming my daily spreadsheet entries on June 15. On June 18 we had a nice gap up in SPOT and we closed that and headed to Colorado for a family road trip.

While traveling, I put on some trades and the markets suddenly went extremely negative, as they often do when I travel. I ended up down 2% on the week but only because I had a great recovery day on Friday. Once again, why couldn’t I just take the week off? I mean, I get it, I like to trade but...!

All in all, June was a great month. Let’s get back in the game. Turn off the news and get back to work.

July, 2020

  • Starting balance: $3,155,005.00
  • Ending balance: $3,376,688.00
  • Money wired out: $1,187,500
  • Balance if no money wired out: $4,564,188
  • Monthly return: 44.67%
  • Trading Days: 22
  • Winning days vs. losing days: 15 winning days, 7 losing days
  • Avg winning day: $233,151.50
  • Avg losing day: $298,298.42
  • Biggest Daily Loss: -$732,308.75 (Overnight move in AMZN long calls destruction) 
  • Biggest Daily Win: $1,325,736.45 (TSLA)

For the week starting with July 6, I started off bearish with puts on SPY and lost $100K right off the bat. Later in the day I bought 100 calls on TSLA and it exploded into the close. I sold half and kept half. I had up days every day this week and was really in the zone. On Thursday night I noted that I had, “A lot of AMZN and TSLA exposure going into Friday the 10th.

On Friday the 10th, I was initially down over $200K with TSLA gapping down. AMZN was doing well and I closed out that position. I had some small NQ and ES futures that I closed out at the lows of the day like a noob. But I held onto TSLA and added to it and it recovered, broke out and went up to new all-time highs. Best trading week of the year and another million-dollar TSLA trade.

On July 13 my portfolio was up about 10% and I decided to buy 4,000 shares of TSLA and then went to go look for the zebras, which I had purchased the month before. You can read about why I bought zebras and what they taught me in this short article.

When I came back from the hike, TSLA was down $150 a share from my entry. This is not something I thought would happen and I have no excuse for not having a stop loss in place. Lost 12% that day. I never recovered from that and ended the week down 15%.

The week of July 20 started great, up nearly 10% on Monday. From there, I had a decent position in AMZN that tanked, giving me my biggest loss of the month, and I ended the week down 9%. The next week was steady, up 15%.

I ended up wiring out a lot of money this month. This was for taxes as well as a downpayment on a new house we committed to in February, before all the Covid-19 went down. We could walk away from it and lose our 10% deposit. But I wanted to go ahead and get the house. If we ever do go back to Austin, it’s a great house in a perfect central location on a 5-acre lot with trees all over the place.

August, 2020

thinkorswim®

  • Starting balance: $3,376,688.00
  • Ending balance: $11,360,342.20
  • Money wired out: $650,000.00
  • Balance if no money wired out: $12,010,342.20
  • Monthly return: 255.68%
  • Trading Days: 21
  • Winning days vs. losing days: 16 winning days, 5 losing days
  • Avg winning day: $624,860.70
  • Avg losing day: -$272,823.53
  • Biggest Daily Loss: -$362,520.07 
  • Biggest Daily Win: $2,466,165.08 (TSLA)

tastyworks

  • Starting balance: $260,315.30
  • Ending balance: $1,073,646.02
  • Money wired out: $0.00
  • Balance if no money wired out: N/A
  • Monthly return: 312.44%
  • Trading Days: 11 (Started trading in this account on Aug 17)
  • Winning days vs. losing days: 9 winning days, 2 losing days
  • Avg winning day: $95,742.62
  • Avg losing day: -$24,176.44
  • Biggest Daily Loss: -$38,290.00 (CRM, TSLA, manageable positions though) 
  • Biggest Daily Win: $221,108.49 (TSLA)

August was quite the month. For the first week of August, basically everything I touched turned to shit and I lost 8.03%.

For the week of August 10, I had some back-and-forth and ended the week up 15.08%. I lost money on AAPL, and made it on TSLA. This started a streak where I made money each week for the next 2 ½ months. 

Note, on August 10, I also wired over $200K to tastyworks (TW). I had $60K sitting there doing nothing. I wanted to get a portfolio margin on that account, so I sent over more funds. I started tracking my daily account balances in TW this week as well, starting on August 17. 

On Thursday, August 13, in thinkorswim® (TOS) I placed a 500-contract call debit spread on TSLA and posted it in the trading room as a 15% position. I also bought 1,000 shares of the stock, which is like 10 in-the-money call options. On Friday the 14th it disappointed, gapping up and selling off, then finally rallying a bit into the close. I held on for the weekend. Below is what the 30-minute chart looked like, which is about damn near perfect. I did a similar, smaller position in my TW account. I think it was a 100-contract call debit spread. 

Although it was extended on the daily charts, the 30M chart was a textbook bullish setup, and this is what I was trading:

  • Moving averages stacked positive
  • Squeeze early warning buy signal arrows
  • Ready. Aim. Fire!® buy signals
  • Momentum turning back to cyan on the 30M squeeze, indicating the slight positive shift in momentum
  • Cup and handle pattern
  • It doesn’t get any better than this on the long side

On Monday, Aug 17, TSLA gapped up and... kept on going. AND TOS WAS DOWN ALL DAY! TSLA closed at $1,835 (up $186 a share on the day). It blew through my short strike, which is a great thing with a call debit spread. Now I could just hold on and collect premium decay. I decided to hold it overnight.

It wasn’t lost on me that, had I just bought calls, I would be up like $6 million on this trade, since a call debit spread caps gains. But it begs the questions, “Would I have been able to hold onto it that long?”

If I’m being honest with myself, probably not.

On Tuesday, Aug 18, TSLA kept going. I was quickly at 85% of max profit on my call debit spread and realized it didn’t make any sense holding onto it any longer. This turned into my biggest trade ever, right around $3.75 million. Since my trading platform was down, I had to close it on my iPhone, which was a first. For the week, I was up 156%, just over $5 million.

The next week I made 21.67% to end August on a high note.

My $260K tastyworks account was also off to a good start, ending this same week at $460K. I’m sure everyone at Tasty thought I was insane LOL.

This was all a bit overwhelming and surreal and I needed to process what happened.

I packed up my family and we headed to South Padre Island. I knew I couldn’t let the euphoria get to me. It was just time to catch my breath and get ready to go back to work.

South Padre Island was amazing. I only remember it vaguely from Spring Break in college. When it's not Spring Break, it’s a sleepy little beach town and is the best stretch of beach in Texas. I get it — that’s not saying much —-  but we were in lockdown and you do what you can. Prior to this, we would schedule regular recharge trips to the Cayman Islands, where we have a condo on 7-mile beach. We love these trips and really missed our family beach time. This got me thinking about getting a beach house in South Padre. At least we could drive there without having to take a Covid-19 test.

At this point, I had a large amount of cash. Should I YOLO (You Only Live Once) it and try to double it again? Or take some money out and put it into tangible assets that the markets couldn’t take away from me? Namely, real estate, gold, silver and crypto? Having done this for a long time, I had no illusions that I was now a “trading master of the universe.” I was dialed into the markets and I followed my plan. That’s it. Will I be as dialed in next week? Will I be able to perceive what the market is willing to offer me next month? I didn’t know and I don’t know and I never will know. Trading is a daily psychological session to see if you are living in the present or not. Needless to say, I decided to start taking out larger sums of money.

Writing this in January, 2021, and being a genius in hindsight, I would have put it all into bitcoin and GME. As it stands, I put most of it into real estate and some of it into gold and bitcoin. In trading, I’ve talked about how we need to let go of anxiety and fear and anger in real-time, as it comes up. One thing I’ve also learned is we have to let go of any fantasies we entertain of having the perfect genius in hindsight trade. “If only I had bought 10,000 bitcoin! If only I had bought 1,000 TSLA calls and never sold!” These kinds of fantasies also destroy our ability to act in the present moment, and must be eliminated (i.e., let them go) as soon as they come up.

At this time I also decided that I would use $10 million as my new “baseline” in my TOS account and I would just wire out anything above that. This was a huge mistake.

As you’ll see, that idea didn’t last long and eventually backfired. Looking back, I realize what a huge mental shift that caused. Now I was unconsciously trading “not to go below $10M” instead of making myself available to the market opportunities. I was trading from a subtle fear of losing. And what you think about, eventually comes about.  

September, 2020

TOS

  • Starting balance: $11,360,342.20
  • Ending balance: $12,155,542.03
  • Money wired out: $3,050,000.00
  • Balance if no money wired out: $15,205,542.03
  • Monthly return: 33.85%
  • Trading Days: 21
  • Winning days vs. losing days: 16 winning days, 5 losing days
  • Avg winning day: $312,727.69
  • Avg losing day: -$214,356.26
  • Biggest Daily Loss: -$664,712.67 (Teaching a class while ignoring my positions. Trend?) 
  • Biggest Daily Win: $844,057.03 (SHOP, indexes)

TW

  • Starting balance: $1,073,646.02
  • Ending balance: $1,181,744.10
  • Money wired out: $0.00
  • Balance if no money wired out: N/A
  • Monthly return: 10.07%
  • Trading Days: 21
  • Winning days vs. losing days: 9 winning, 7 losing, 5 days 100% cash, no trades
  • Avg winning day: $55,949.96
  • Avg losing day: -$56,493.09
  • Biggest Daily Loss: -$179,020.00 (Lost focus due to class. Haven’t I written about this?) 
  • Biggest Daily Win: $152,864.34 (long index plays)

Now I’m trading two large accounts. TW is a bit of an afterthought, with TOS as my main focus. 

For TW, it started strong, up 6% in week 1 and 7% in week 2. 

For week 3, Wed the 23rd I lost 15%. “Total crap day. AMZN, DKNG, NVDA, SPOT. I didn’t even look at this account once today as I was focused on my class. Worst day of the year for this account.” I lost 14% that week and then another 14% the following week. On September 28 I had a strong day up 14% being long the indexes. This last trading day of the month I had a great day, and this, and only this, turned this account positive for September. 

For TOS:

I gained 7.30% the first week from the market puke and shorting NFLX, FB, and NQ. The second week, my gains exceeded 15%, again on bearish trades, in NQ, AMZN, and NFLX.

For week 3, it was volatile yet ended up 1.36% on the week.

Overall, a solid month in my TOS account. I did end up wiring out a lot of money to start putting it into tangibles. My goal heading into October was to keep my TOS balance at $10 million and wiring out funds above that amount for tangibles. This includes real estate deals I’ve committed to and would be closing in October.  (To be continued...)

(Note: This article compiled from “2020 Year-End Trading Journal Summary - The Road To A 1,270%, $18.2 Million Year” written and published by John Carter, Founder of Simpler Trading.)