The Delta-Neutral Setup: How To Profit In Any Market Direction

0:00You can make a lot of money. The

0:01strategy is easier. It's based on maths.

0:04So, if you can do basic maths, you can

0:06do it. If the market stays flat, I make

0:08profit. If the market goes up, I make

0:10profit. If the market comes down a

0:12little bit, I make profit. My goal was

0:14to double the account in 1 year, but I

0:17ended up doubling it in just a few

0:18months. In a delta neutral strategy,

0:20instead of predicting the market

0:22direction, we take both sides of the

0:24trade. So, even if I start from $100,

0:27the price goes to 95, even though

0:29technically the stock is down, but I'm

0:31still winning. As the time passes, you

0:33see this gap grows because your

0:35near-term option is growing at a faster

0:37rate. As this gap grows, this is our

0:40profit, but this is where our edge comes

0:42from. Based on the back test for several

0:44last years, I know what the win rate is

0:46going to be, what the expectancy is

0:48going to be, and I can just execute that

0:50strategy every week.

0:52>> So, you you are the casino.

0:55>> You can say that.

1:00>> Welcome to Undiscovered Traders. Today,

1:02we welcome Ravish from Greater New York,

1:04currently completing his $1 million

1:06challenge trading two very unique

1:08strategies we've actually never had

1:10covered before on the podcast. Joined

1:13him for last year, already setting up

1:14$327,000

1:17in broker verified profits. And this is

1:19kind of the crazy part.

1:22He's done it without ever looking at a

1:24chart and executing roughly 2 hours a

1:27day. So, this is a potential strategy

1:29for part-time traders. And today, we're

1:31going to look at his delta neutral

1:33strategy and his time spread strategy.

1:36He's got a full deck, full strategy all

1:38prepared to walk you through walk us

1:40through for you guys. Full value, but

1:41first there

1:44How are you, Ravish?

1:46>> I'm good. Very well. Thank you for

1:48having me.

1:49>> You've made I mean, we've got like

1:51300,000 plus verified. I think it's a

1:53bit more than that. But you've made

1:55$300,000

1:57without

1:58uh looking at charts. Can you just What

2:00do you look at if you're not looking at

2:01charts?

2:03>> So, I make my trades using option

2:05Greeks. I'm an option seller.

2:07So, the strategies that I practice are

2:10actually systematic strategies. They are

2:12based on option Greeks and options data.

2:15And everything is priced into those

2:18premiums, and we can use that to make

2:20these trades

2:21without having to worry about what's

2:22going on in the chart.

2:25>> Nice. And I just want For the For the

2:27people watching, comment below like what

2:29your experience level is with options.

2:31I'm just curious

2:32uh if people how how experienced they

2:35are in it because I think options are

2:36starting to boom now, but what would you

2:38say is the kind of the advantages to the

2:40strategies that you're about to kind of

2:42walk people through and teach people

2:43today?

2:44>> So, most people when they start with

2:46options, they start by buying options.

2:48They buy call and puts. And when you do

2:51that, you are fighting against the time

2:53because there is something called theta

2:55premium.

2:56And your option decays very rapidly. And

3:00if the price does not move fast enough,

3:03then your options go to zero. So,

3:04statistically, 80% of the options go to

3:07zero. And that's why most option buyers

3:10lose money.

3:11So, that means people who are on the

3:13selling side of the options, they can

3:15win most of the time because they are

3:17the ones selling these options.

3:18>> You were telling me a couple of things

3:20just before

3:21um before we went on the air, and it was

3:23kind of you you said that your strategy

3:25was too easy. Was it or was it was hard

3:28it was hard to go wrong?

3:30Tell me a bit about that.

3:32>> So, it's it's too easy for me now

3:34because I've been doing it for many

3:36years.

3:37Uh but for someone who's new, it's

3:39initially going to be definitely there

3:41is going to be a learning curve, but

3:43it's well worth it.

3:44>> It's very easy to make mistakes. But for

3:46with your strategy, you were saying

3:47there's more of a

3:48a margin for error. Can you tell me a

3:50bit about that?

3:52>> Yeah, so most traders what they do is

3:55they try to predict the price. They look

3:57at the charts, they look at the

3:58patterns, and they try to predict where

4:01the market is going today, where is it

4:03going next week. And uh based on the

4:06chart patterns, statistically, there is

4:09no real proven edge in it. Some people

4:11have developed their system with a lot

4:14of experience and instinct. But if we we

4:17are clearly looking at technical, there

4:18is no like clear technical pattern which

4:21we can say that you just follow this

4:23pattern mechanically and it's going to

4:24work.

4:25But when we come to the option selling

4:27side, there is a risk premium baked into

4:30the options. So when you are selling

4:32options, you have an edge.

4:34And I don't have to be precise on my

4:37timing or my entry. I can have a lot of

4:40room for error. The market can go up,

4:42down, or in circles, and I can still

4:44make profit in any market condition. So

4:46last year I started a brand new account.

4:49Now in the past I've made millions in

4:51profits, but last year I was like, if I

4:53were to start a new account with

4:55$100,000, can I make 10K a month with

4:57it? Which is like a goal for a lot of

4:59people.

5:00So

5:01turned out that was too easy. Right off

5:03the bat, in the first months I started

5:05to make 15, 20,000 dollars with it. My

5:08goal was to double the account in 1

5:10year, but I ended up doubling it in just

5:12a few months. So I was like, this is too

5:14easy, I need to level it up. So then now

5:17my new benchmark is how do how fast can

5:20I grow this to a million dollars?

5:22There's no fixed timeline for it, but we

5:24are now 14 months in, and the account is

5:27already at 450,000 now.

5:30>> So many people are getting 10% interest

5:32a year.

5:33I mean, how many hedge funds are out

5:35there? And people are putting all of

5:37their savings, 100, 200,000 of their

5:38savings, and they're lucky if they get

5:4010% in the year, if it's a good year.

5:42Especially in the United States, it's

5:44it's been a little bit the the SPY and

5:47the Qs have been returning less than

5:49than the markets in Europe these days.

5:53>> Yeah, absolutely. For most people, 10% a

5:56year is the S&P benchmark. And here I'm

5:59able to compound this account in 10 to

6:0215% a month. Now, when people think of

6:04compounding, people think of compounding

6:07on an annual basis, but compounding is

6:10actually based on intervals. It can be a

6:12monthly thing. It can be quarterly

6:14thing. The faster you can compound the

6:17shorter intervals you have, the more

6:19profit you can make with it.

6:22>> So, I've got two questions really for

6:25you. I mean, first of all, I think it's

6:26it's an incredible return on investment

6:28of a system that returns 10% a month

6:30kind of systematically rather than

6:32discretionary day traders who are

6:35making 25% or 30% over a couple of

6:38months and then they've lost 100% when

6:40they blow up on shorting the crazy meme

6:42stock or something like that. I think

6:45I'm really looking forward to getting

6:46into your strategy, but I mean, first of

6:48all,

6:49um

6:50do you need a lot of money to do this?

6:51For the people learning, can you start

6:53small?

6:54>> Yeah, absolutely. You can start with as

6:56little as you want. In fact, if you're

6:59new, I would recommend you to start with

7:01as little as possible because no matter

7:04what strategy you try, there is going to

7:05be learning curve. Initially, you can

7:07lose money.

7:08So, the goal should be to lose as little

7:10as possible while you're learning

7:13so that you don't get

7:15you don't get hurt by the market. The

7:18The mistake some people do is they start

7:20with two large positions. They have a

7:22couple of bad losses, and it sets you

7:24back and and it demotivates you from

7:27even trying something new

7:29because you might be close to getting a

7:31positive expectancy. You might be close

7:33to getting that edge, but now you have

7:36had a setback, you are going to stop

7:39trying it.

7:40>> How easy is this to for people to learn

7:42and replicate because I think for some

7:44newer traders these are some scary

7:46sounding words delta delta neutral time

7:49time spread strategy.

7:51>> So

7:52most people the thing is that most

7:55people are not aware that something like

7:57this exists.

7:58But once you understand the basics

8:01at some point it will become a second

8:02nature

8:03because

8:04if you are brand new to trading there is

8:06a learning curve but this is way easier

8:09than charting and technical analysis and

8:11doing all those patterns and indicators.

8:14>> I love that. So it's easier. It's it's

8:16the strategy is easier it's just less

8:18conventional.

8:19>> It's based on maths. So if you can do

8:21basic maths you can do it.

8:24>> And just just lastly

8:26first you have a YouTube channel right?

8:27So people want to watch this and learn

8:29more about it.

8:30You've got a ton of videos.

8:33>> Yeah I teach almost all of my strategies

8:36in-depth on my YouTube channel. So if

8:38you like any of these strategies you can

8:40go to my channel and watch full videos

8:42on them

8:43where you can learn them how to get

8:44started with it.

8:46>> Guys and the the link is in the

8:48description below and just before you go

8:50through your strategy two strategies

8:52actually two option strategies before

8:54you go into that just quickly I know I

8:56know we've we've only got 300,000

8:58verified for you on Kimble because

9:00because you've just uploaded the broker

9:02last year.

9:03So what's how long you've been trading

9:04for? What's your total profits?

9:07>> So I've been trading for almost 10 years

9:09now. Initially when I started it was

9:13it was actually a stroke of luck. I went

9:15to the Robinhood app to buy stocks. My

9:18goal was I will buy Fang apps Fang

9:20stocks.

9:21And when I clicked on the trade button

9:23it showed another button called trade

9:25options.

9:26So initially I thought it would give me

9:28some options some advanced options to

9:30submit my order.

9:31And then I clicked on it and learned

9:33about calls and puts it was something

9:35brand new to me.

9:36And I was like this sounds fascinating.

9:38I can control with 100 shares of a

9:40company like Meta for just a few hundred

9:42dollars.

9:44So, I was like, okay, let me try it. And

9:46I put in $500 in my first trade. Next

9:48day, it turned into $2,500.

9:51>> Oh.

9:51>> And then another trade next day, next

9:53day overnight trade, made another

9:55$1,500. So, in my first week, I made

9:58like $5,000 without even knowing what I

10:00was doing.

10:02And I started my account with just

10:03$2,000.

10:05So, I was like, this is amazing. I'm now

10:07going to do this and retire from

10:08everything else. I was working in tech

10:10back then.

10:11So, I was like, this is too easy. I

10:13should do this all the time.

10:16But but that beginner's luck didn't last

10:19very long. And then I losing money as

10:21most traders do.

10:23And

10:24I spent several years trying to chase

10:26that rabbit hole doing technical

10:28analysis on charts, buying options,

10:31losing money.

10:33It was an expensive lesson.

10:35But I think every trader needs a journey

10:37like that to get to a point where you

10:40find something that works for you.

10:43And then I learned about option selling.

10:45And

10:46I was like, this I like this because I

10:49don't have to look charts, I don't have

10:51to be good at technical analysis.

10:53I can just do simple maths and bet on

10:56probabilities

10:58and have the house advantage. Because

11:00when you are buying options, you are

11:02like a gambler trying to time the market

11:05or play your luck. But when you are

11:06selling, you are the house. You have the

11:08house advantage.

11:10>> So, you you are the casino.

11:13>> You can say that.

11:15>> You you are the casino. It's like It's

11:17like rubbish palace, not Caesar's palace

11:19um in Las Vegas. But I'm curious to get

11:22into it. Do you want to open up the Do

11:24you want to open up the deck and and

11:25let's see let's see this strategy.

11:28>> Okay. So, a little bit about me. Uh been

11:31trading options for more than 10 years

11:33now. I had a career in tech. I retired

11:36from my career a couple of years ago

11:38when I hit a point where my options

11:40income was more than my full-time job.

11:42So, at that point it made sense to go

11:44all in on it because I thought that I

11:47could be I should be able to do much

11:48better.

11:49And uh like I said, I started out with

11:51the beginner's luck. But then there were

11:53several years of period where it was hit

11:56and trial, losing money, learning

11:58different thing. I had a big setback

12:01during COVID period. By that time I was

12:04like, "Okay, I need to do something

12:06better here."

12:07Because uh most of because buying

12:10options I'm losing most of the time. So,

12:12I learned that there is a selling side

12:13of options also. Who are making profit

12:16off me.

12:17So, I decided to learn that side. I

12:19started selling options. Initially, when

12:21most people start with selling options,

12:23they start with simple strategies like

12:26selling cash-secured puts, selling

12:28covered calls. Which can work well. A

12:30lot of people make 20 to 40% annual

12:33return with those kind of strategies and

12:35they have been battle-tested for many

12:37years and they work well. And they have

12:39a lot of margin of error.

12:41Um

12:42but then I was like, "Okay, how do I do

12:45something better?" Because at that point

12:47my account was relatively small. I was

12:49trading with about 20 30,000 dollars.

12:51So, even if I made 10 20 percent in a

12:54year, it was not really worth of the

12:56time. So, I was like, "I need to do

12:58something exponential here."

13:00Um and then I started to contribute more

13:04to my account. I was growing my account

13:06consistently. I started to use some more

13:08leverage.

13:09And I was doing really well

13:11until 2022. In 2021, I had a blockbuster

13:15year.

13:16And in 2022, I realized that was a bull

13:18market genius.

13:20That when everything is going up, it's

13:22easy to make money.

13:23When everything goes down, you get

13:26crushed hard.

13:27And uh

13:29at that point I decided that I will

13:31focus on something called a delta

13:33neutral strategy.

13:35In a delta neutral strategy, instead of

13:37predicting the market direction, we take

13:40both sides of the trade.

13:42And if the market trades in that range,

13:45you make profit. And the best thing

13:47about that is that delta neutral

13:49strategies are even more profitable in a

13:52down year like 2022.

13:56>> Nice. Interesting. So is a delta neutral

13:57is is it kind of like you want the stock

14:00to stay where it is? Or like is it like

14:02a butterfly pattern or something like

14:04that?

14:05>> Yeah, there are a lot of different

14:07patterns. Uh

14:08delta neutral is one umbrella term for

14:11several different option structures.

14:13Simplest one is triangle and iron

14:15condor. We can dive into some examples

14:18on how they work.

14:20Uh once you understand, it's fairly easy

14:22to do.

14:23>> But can I just understand by delta

14:25neutral what you want the stock to do?

14:27When you when you place an options

14:28trade, what you want the stock to do?

14:30>> We want the stock to trade in a range.

14:32So, for example,

14:34>> Okay. So, let's say we have a stock

14:36that's trading at $100. We start here.

14:39And then we sell a put at $90 and we

14:42sell call at $110.

14:45So, we have 10% up and down range. As

14:48long as we stay in this range, the

14:50market can go up, down, or in circles.

14:53As long as it stays in the range,

14:55we get premium from both sides and we

14:57keep that premium.

15:00We sell call to someone, we sell put to

15:02someone.

15:03And we if we stay in the middle, we win.

15:06So, even if I start from $100, the price

15:09goes to 95, even though technically the

15:11stock is down, but I'm still winning

15:14because it is still above my 90 strike.

15:18>> Yeah. Yeah, makes full sense. I'm not

15:20going to ask any more questions. I'm cuz

15:21I think you you I'll I'll ask you

15:23questions later in the presentation. So,

15:24I'll let you go back and then we'll

15:26continue.

15:27>> So, I've been trading Delta neutral for

15:29several years now and at this point I've

15:31become like a very good expert in it.

15:34And my strategies are a very systematic.

15:37They're based on backtesting.

15:39And

15:41a lot of these strategies are mechanical

15:43and even automated.

15:45So, the way it works is let's say I find

15:47a strategy where I open a trade at a

15:50fixed day at a fixed time with a fixed

15:52structure.

15:54And based on the backtest for several

15:56last years, I know what the win rate is

15:58going to be, what the expectancy is

16:00going to be, and I can just execute that

16:02strategy every week.

16:04So, using strategies like these,

16:07uh my goal was to make $10,000 a month

16:09on a new account with $100,000.

16:12And now this account is up to 456k

16:15including unrealized gain.

16:18My initial goal was to just make $10,000

16:20a month.

16:21The most fascinating part is that

16:23now this account that I just started

16:25with 100,000 last year,

16:27it is making more than 50,000 in a

16:29month.

16:31If you see on Kinfo, my last one month

16:33realized gain is $97,000.

16:36And this month currently month to date

16:38is $70,000.

16:40So, it is just like crazy to me that you

16:43can make this kind of return with just

16:45just starting with 100,000. Now, if you

16:48have smaller account, you can start with

16:5010,000 also.

16:51But, it will need time and experience to

16:54get to a level where you are able to

16:57produce returns which are phenomenal.

17:00>> Yeah, it's it's it sounds quite

17:02interesting because I it's not re I

17:04mean, is there a lot of creative

17:06creative thinking in the backtest and

17:09finding formulas or is it just very

17:10process process driven and repeating

17:13repeating what the data says?

17:14>> It is based on data. So, a lot of the

17:17data is actually based on the option

17:19Greeks. So, once you understand the

17:22option Greeks, initially it might sound

17:24a little bit complex,

17:26but if you just spend some time to

17:27understand it,

17:29it will unlock a whole new world for

17:30you, which I I'm sure it's going to be

17:32life-changing for most people.

17:35>> And and the Greeks are

17:37the Greeks aren't some

17:38some color it's the No, it's I was going

17:41to say the Greeks aren't some coliseum

17:42in Rome Rome, but it's I think that's

17:45that's a different country, but the

17:46Greeks aren't too the Greeks aren't too

17:48confusing really. What what what are the

17:50Greeks for the people I don't don't

17:51know. It's it's

17:53alpha, delta, gamma, theta, and

17:57implied volatility.

17:59>> focus on the Let's focus on the two

18:01simplest Greeks for now, which most

18:04people can easily understand. And 80% of

18:07the time you just rely on these two

18:08Greeks.

18:09One is delta.

18:11A delta basically means

18:14a multiplier.

18:15Right? So, if I have a If I have a stock

18:18that's trading at $100,

18:20and I buy a call option,

18:22which is currently at 20 delta,

18:25that means it will have a 20x

18:27multiplier. For every $1 the stock is

18:30going to move,

18:31my option is going to go up by $100 by

18:34$20.

18:35>> Yeah.

18:36>> So, that means if I buy this call option

18:38for Let's say I pay $200 for it.

18:41And I buy that call option, the stock

18:43goes up by 5%. So, stock goes up by $5,

18:48that means my option can gain five

18:51about 5 into 20 is $100 in premium.

18:55>> Yeah.

18:55>> So, an option that I bought for $200

18:58can make 50% return if the stock goes up

19:015%.

19:02>> Yeah, makes sense.

19:04>> And now another way that this option

19:06represent is that if you as an option

19:09buyer, you are buying a 20 delta 20

19:12delta call

19:13the chances of you making profit in it

19:16is only 20%.

19:18>> And if right

19:20>> If I'm selling an option and I'm selling

19:22that 20 delta option to you the chances

19:25of for me to make profit in that is

19:27about 80%.

19:30>> Is that is that true when when you read

19:31it out or is it you read the delta as

19:330.2 on the screen don't you? Like that's

19:36that's normally how it shows up and that

19:38literally means 20% chance of this

19:40working does it? The

19:42the Greeks the the machine is is is

19:45suggesting that.

19:46>> Yes, so that means it has 20% chance of

19:49expiring in the money. That means it

19:51will make some profit

19:53in about 20% of the times.

19:57So as an option seller if you are

19:59selling 20 delta calls or 20 delta puts

20:02you are going to make profit most of the

20:04time.

20:05>> Interesting. And obviously if that delta

20:07changes by which how far out away from

20:11the the money the the puts are or the

20:13calls are that you're buying the the

20:14delta would

20:15>> Yeah, it can be it can be it starts from

20:18like at the money is $50.

20:21The further out of the money you go the

20:23lower delta it's going to be.

20:25There are some option sellers who even

20:26sell like five delta option. They will

20:29have 95% win rate.

20:31But it but there is also another side to

20:34it.

20:35In one of case where the market has like

20:37a parabolic run

20:39they can also lose more than what they

20:41are making in in a single loss. So their

20:43losses are going to be bigger but they

20:45will have a higher win rate. So you have

20:47to optimize for the balance

20:49where I have high win rate

20:52with an even risk reward. So I

20:54personally like trades where I can have

20:5670 to 80% win rate

20:58with an even risk reward. If I'm winning

21:00I'm making $100 if I'm losing I'm losing

21:03$100.

21:04That means as long as I win more than

21:0650% of the times, I can be profitable.

21:09So, in actual terms, my win rate is like

21:1270% to 80% varies month on month. Last 2

21:15months has been close to 100% and you

21:18can trade it in many different ways.

21:20There are a lot of

21:21you can put together two to four options

21:24in a spread and come up with a lot of

21:26different strategies where you can

21:28construct a very sophisticated trade

21:31which can give you a lot of edge.

21:34>> And do you know what do you know what I

21:35think is uh is cool from what I'm

21:37understanding of your strategy is most

21:40people cuz

21:41I've traded with a lot of small cap

21:42micro cap equities traders and um

21:45the main thing about the complaint about

21:47is markets are quiet, it's dead,

21:49summertime July August. But your

21:51strategy probably loves summertime

21:53because you you want nothing to happen.

21:55The less that happens is the better. Is

21:57it not?

21:59>> Yeah, absolutely. We actually love the

22:01choppy market. Now, most traders

22:03complain about losing money in the

22:05choppy market especially if you're

22:07buying option in the market is choppy,

22:09your option goes to zero.

22:11That's what option sellers love.

22:13We like to sell options in that choppy

22:16market. Now, most of the time market is

22:17choppy.

22:19So, we sell options in that choppy

22:21market and make premium from both sides

22:24and your options expire worthless, we

22:26make money.

22:28>> Yeah, so

22:29you don't you don't love the

22:31the AI boom and revolution and Sandisk

22:34and Nvidia. You're you're loving the

22:37the boring uh what supermarkets or

22:42consumer staples is it that kind of more

22:44boring more boring industries like

22:46Walmart?

22:48>> So, I invest into

22:51I invest into all types of companies. I

22:52may very bullish I'm very bullish on AI

22:55and tech and I have lot of investments

22:58in all the big tech companies, AI

23:00companies, semiconductor companies.

23:02Uh when it comes to selling options,

23:05I am agnostic to the stock. The

23:07fundamentals of the stock does not

23:09matters to me. The

23:11uh

23:12the technical I don't do a lot of

23:15technical analysis.

23:16I look at stocks which have like a

23:18predictable range.

23:20And I trade options in those range. Now,

23:22there are some uh some periods where you

23:26can expect higher volatility.

23:28And in those periods, I would just step

23:30out of the market. Yeah, it's like

23:32selling insurance. So, let's say um you

23:35want to if you're selling insurance,

23:37you want to sell insurance where you

23:39have low risk.

23:41If you know that there is a flood

23:43warning warning, are you going to sell

23:44insurance in a flood warning? I'm not

23:46going to. I'm going to step out of the

23:48way.

23:49Even if it means that I do not make any

23:51trade for a month, I'm going to be okay

23:53with that.

23:54Because it is better to not trade and

23:57not lose money

23:59than going in the market and risking

24:01taking unwanted risk and losing money.

24:04So, you have to

24:06pay some attention to the macro cycle,

24:08what's going on in the market, is there

24:10any war going on, is there any FOMC

24:13coming?

24:14So, just step out of those events and

24:16most of the time it works well.

24:18Another great thing Now, this is a

24:20screenshot from my broker.

24:22The best part about the strategy is that

24:24if you see, it is up like 300% in uh

24:27since I started.

24:29But there is very little drawdown. It is

24:31pretty much going straight up. Then

24:33there are periods of flat months where

24:35like I said, I stopped trading in some

24:37months. You see like this flat period,

24:39like this was Iran war situation, I was

24:41flat.

24:42Because why take unwanted risk?

24:45Uh

24:46so, my drawdown is in single-digit

24:48percent. Typically, traders who make

24:51this kind of returns

24:53will have very high drawdown. They will

24:54have 50-60% drawdown at times.

24:58Here I have almost no drawdown. So, it's

25:00very low stress strategy for me.

25:03And even this this during this period,

25:06there were multiple drawdowns in S&P

25:08ranging from 15 to 20%.

25:11We went through the tariff situation. We

25:13went through the Iran war. S&P had

25:15multiple big drawdowns. My account had

25:18almost no drawdown.

25:20>> Yeah. Yeah, I think you can't stress

25:22that enough. It's It's

25:23we literally

25:25So, like two 10 to 20% drops in in the

25:28queues and the spies for the tariffs and

25:31the war. Yeah, it's incredible that

25:32you've uh

25:33>> Right. Now Now, a lot of people will say

25:35that oh, if you are making 300% 200%

25:39return in a year,

25:40you are beating all the hedge funds. Uh

25:43you can be a trillionaire in few years.

25:46If you are compounding at 200%, you can

25:48be a trillionaire in few years.

25:50>> True.

25:50>> But, that's not possible

25:52because of liquidity.

25:54In a lot of these trades, there is not

25:56enough liquidity

25:58that I cannot go out and put a billion

26:00dollar trade in a strategy like this.

26:03So, I can trade a few million dollars

26:05with a strategy like this,

26:07but I do not I cannot trade billions of

26:09dollars in a strategy like this and

26:11still generate same kind of returns

26:13because then you become the biggest

26:15position in the market and market makers

26:17will hunt you down.

26:20And

26:21so,

26:22there is liquidity concern where which

26:25is why you cannot scale it infinitely,

26:28but I'm happy to make a few million

26:29dollars. I'm not even thinking of that

26:31level.

26:32Uh

26:33and the other thing is the mindset and

26:35psychology.

26:36As my account size uh sizes are growing,

26:40I do not feel comfortable risking large

26:42amounts of money

26:44because capital preservation is the

26:46priority for me now.

26:47When you're starting with let's say

26:49$10,000, your goal is to get to

26:50$100,000.

26:52When you have made millions of dollars,

26:54you want to protect those.

26:56So, instead of which is why I was like,

26:58okay, I will start a new account with

27:00100k because I can afford to lose 100k.

27:03It If it goes to zero, it's not going to

27:06affect me.

27:07But, using that risk capital, I have

27:09swing I can take a shot at making it

27:1110x.

27:13>> Yeah.

27:14Fair. Makes sense. And And it's it's

27:16great it's great learnings and examples

27:18for newer traders who need a

27:20uh amplify their accounts and and turn

27:221,000 into a couple.

27:24>> Yeah, so anyone who wants to do trading,

27:26what I would recommend is like allocate

27:28a certain risk capital which you are

27:30okay if it if you lose it.

27:33That's way That way you can protect your

27:35bigger capital.

27:37But, and risk small amount to get to a

27:39point where you can be consistently

27:40profitable.

27:42So, uh let's get into the strategy. So,

27:44my first strategy is called delta

27:46neutral strategy. Now, this is an

27:48umbrella term for a lot of other

27:50strategies.

27:52Strategies like strangle and iron

27:54condor.

27:56Uh the main the way this strategy works

27:58is

27:59uh let's say you are an option buyer.

28:02You think the stock is going to go up,

28:04you buy call.

28:05If you think the stock is going to go

28:06down, you buy a put.

28:08What I think is I don't care where the

28:11stock is going. I'm going to look at the

28:13data.

28:14Let's say a stock is trading at $100.

28:17And my data says that in a given time

28:20period, let's say the time period is 1

28:22month,

28:23I think that this stock is going to

28:24trade between 10% up or down range.

28:28Based on the data, I can tell that uh in

28:31a month, the trading range for this

28:32stock is about less than 10%. Maybe it's

28:345 to 7%. So, I'm going to add some

28:37buffer to it.

28:38And I'm going to sell a put which is 10%

28:41down from the current price. And I'm

28:44going to sell a call which is 10% above

28:46the current price.

28:48And I'm going to collect premium from

28:49both side. So, the put buyer is going to

28:51pay me credit. The call buyer is going

28:54to pay me.

28:55As long as the stock trades in this

28:57in this range,

28:59both of these expire worthless and I get

29:01to keep that profit.

29:05>> Can I ask what happens if

29:08it's very rare to happen, but what

29:10happens if

29:12um I don't know, it's British British

29:14Airways. Yeah, yeah, it's a safe uh

29:17American Airlines, something like that.

29:19It's a safe type of player that you play

29:21and one of the planes crashes or they

29:23found out that every single broken and

29:25it's a complete crisis and and the stock

29:26goes from 100 to three

29:29overnight. Is will that be a big loss?

29:32So, big loss as well.

29:35>> So, there are two ways to do this.

29:38One is defined risk and one is undefined

29:41risk. So, let me show you with an

29:43example.

29:44So, I use this tool called Option Strat

29:46to model my trades. Uh so, the simplest

29:50strategy is called strangle. So, let's

29:52say I want to make a trade on Meta. Meta

29:55has been through with the earnings.

29:56After earnings, there is a period of

29:58choppy period when the market tries to

30:00discover what what's next.

30:02So, I think I think that next 1 month

30:05can be like a calm period for Meta.

30:07The stock is trading at 605.

30:10I can go sell a put at 505 strike and I

30:14will get $380 $380 credit from it.

30:17And I can sell a call at 650 strike.

30:21And I will get $738 credit. So, total

30:24I'm getting like close to

30:26$1,120.

30:28And now, this gives me a range where the

30:30stock can go up or down

30:34in between this range, right? So, the

30:36price starts here or the next 1 month,

30:38the stock can go up or down like this.

30:40As long as it stays in this range,

30:44I get to keep this profit.

30:46And getting into this trade, you will

30:48know exactly what your chance of profit

30:51is.

30:52So, before I open the trade, it shows

30:54that I have 75% chance of winning this

30:56trade.

30:57And when I lose,

30:59I can use a stop loss. If the price goes

31:02out of this range, I can exit.

31:05>> Uh okay.

31:06So, it say it can

31:07>> of the times I'm winning and winning.

31:09And if it starts to go out of this

31:11range, at that point I can exit. My loss

31:13is going to be maybe a few hundred

31:15dollars.

31:16But there is another way to do this.

31:18Now, this kind of strategy you can say

31:20it's You can see here it says max loss

31:21infinite.

31:23If let's say there is a big news

31:25overnight, Meta stocks goes up or down

31:2720%. At that point, I can lose more than

31:30this $1,100.

31:33>> Yeah.

31:33>> So, in that case, what I like to do is

31:36instead, this is called selling naked

31:38strangle.

31:39So, I typically don't sell naked

31:40strangle like this because it has

31:42infinite risk.

31:44So, I like to hedge it by buying outside

31:47wings.

31:48So, let's say if I'm selling 550 put,

31:51I can buy another put, which can be 10

31:55points out.

31:56>> Yeah.

31:56>> And I can buy a call,

31:59which can also be 10 to 20 points out.

32:01Now, in this trade, my credit goes from

32:05receiving about $1,100,

32:08it goes to $269.

32:10But now my max loss is capped at 731.

32:14Now, no matter what happens,

32:16I'm not going to lose more than $731.

32:18>> Is it not just better to have the the

32:21stop in cuz with with options, it's can

32:23be tricky and they say don't use stops

32:25because you can get tugged out too easy.

32:27Is it Is that the reason why or

32:29cuz you don't you pay an extra premium

32:30unnecessarily, no?

32:33>> Yeah, so but

32:35if you are selling a strangle,

32:37it is not recommended for most people

32:40because you can have like a big black

32:43swan risk. What if there is like a

32:45recession or black swan risk overnight

32:47and the market drops 10%? What if there

32:50is something like COVID?

32:51So, you don't want to get wiped out on

32:54on those days.

32:56>> Yeah, cuz I I was thinking the options

32:58don't trade after hours, so you'll be

32:59okay. But that doesn't mean the world

33:00stops. Anything happens overnight and

33:02the stocks going to open up 20 30% out.

33:05So, you can completely protect yourself.

33:07This is what I love about options. You

33:09know your exact risk, your exact reward,

33:11and the exact probability of the

33:13occurrence.

33:14And you You must You must

33:16You must go to bed sleeping like a baby.

33:18You must sleep very well at night

33:20because everything's already worked out.

33:24>> Yeah, absolutely because I know that my

33:26probabilities are going to work out. And

33:29plus I I spend some additional time back

33:31testing to find these opportunities.

33:34Now, for example, let's say you opened a

33:36trade like this last week. Last week

33:38when Meta was at 708. At that point,

33:41this same option spread was trading for

33:43332.

33:45And now the price is doing thing. It's

33:47going up and down, but you see the above

33:49line

33:50is the trade. The bottom line is the

33:52stock price going up and down. This line

33:55is the trade price.

33:56There is some volatility, but you see

33:58that it's mostly going up to the right.

34:01>> Yeah.

34:01>> And as long as the price stays in this

34:04range,

34:05the premium is going to decay and we

34:07make profit.

34:09And you can do these trades for any

34:11duration. You can do it for um

34:14one-day duration. You can do it for zero

34:16DTD. You can do weekly. You can do

34:18monthly. In fact, I also do some zero

34:21DTD trades where I have asymmetric risk

34:24reward. I can even structure these

34:26trades that I want to risk $1,000, but I

34:29want my reward to be $2,000.

34:32All you have to do is play around with

34:33the strikes and probability

34:36and whatever you are comfortable with,

34:38you can go with that kind of setup.

34:40>> And then this is delta neutral because

34:42you're neutralizing the delta basically

34:43with the

34:44both sides. Both sides the call and the

34:46option.

34:47>> Yeah. And then there is another if you

34:51Now some people are like I I want a

34:53better risk reward.

34:55So either you can have a high win rate

34:58or you can have a high better risk

35:00reward.

35:01I like a balance where like in a trade

35:04like this typically when I start to lose

35:07there are also some adjustment

35:08strategies that I can use where in most

35:11cases my max loss is not going to be

35:13like this.

35:14So in a winning trade let's say I win

35:16$250 in a losing trade maybe I lose $300

35:19but I'm winning 70 to 80%. But if you

35:22want to structure it in a another way,

35:24there is another strategy called iron

35:26fly.

35:27Let's try this on something like Nvidia.

35:30>> Yeah.

35:31>> Another great way to sell is like

35:33Nvidia's earnings is tonight, right?

35:36People don't know if the stock is going

35:38up. Some people are saying it's going to

35:39go up. Some people say it's going to do

35:41go down.

35:42I don't even care.

35:44I'm going to do this strategy with with

35:47on a back test it has more than a 100%

35:50win rate over the last 2 years.

35:52And I'm going to do this tonight. What

35:54I'm going to do is

35:56I'm going to sell a call and put at 225

35:59strike which is the current price.

36:02And I'm going to buy 20 point outside

36:05wing as a hedge.

36:08Right so I'm going to sell 225

36:12sell 225, buy 205 put and 245 put for

36:17protection. This strategy is called iron

36:18fly.

36:19Now

36:21it has 51% chance of profit.

36:25And here the max loss is 894.

36:30And the credit you are receiving is

36:31$1,100.

36:33So, now if you tell me, if we do a coin

36:35flip where you have 51% chance of

36:37winning,

36:38and if you lose,

36:40you lose $900.

36:42If you win, you win $1,100.

36:45Is that a good strategy?

36:47The You see the edge in the maths. I

36:50don't even have to look at the chart to

36:52make this trade.

36:54I have a mathematical edge in this

36:55trade.

36:57>> Yeah, it's a it's very different to to

37:01to how the majority of retail traders

37:03trade. This is not how retail trades.

37:05This sounds a bit more like how hedge

37:07funds probably trade.

37:09>> Yeah, but

37:10yeah, a lot of funds trade like this.

37:13And And in this case, my strategy is

37:15going to be simple.

37:17I'm going to open this trade 15 minutes

37:19before market close.

37:21And tomorrow in the morning, uh, at

37:24whatever price the market opens,

37:26the first thing I'm going to do is take

37:28profits. In the first 5 to 10 minutes,

37:30I'm going to take profit, and I'll be

37:32out of this trade.

37:34May I may not make the full $1,100

37:36profit. Maybe my profit in the morning

37:38is going to be somewhere close to $400,

37:41depending on where the price opens. So,

37:44whatever the profit is, I'm going to

37:45take it in the first 5 minutes.

37:48If I make 50% return in an overnight

37:50trade with just 5 minutes of work, I'm

37:53thrilled with that.

37:54>> Yeah, and so what you need to what you

37:55need what you need Nvidia to sit for

37:57this to for this to work?

37:59>> So, for this to make profit, Nvidia

38:01needs to be in this range.

38:04So, between 214 to 236.

38:08>> Uh, it just needs to sit within that 5

38:105% range tomorrow morning by the by

38:129:30.

38:14>> Yes. So, the market makers are expecting

38:17a 5% movement.

38:20But historically, Nvidia moves less than

38:235% after earnings.

38:25So, over the last year, I've been

38:26trading this kind of strategy for every

38:29every earnings. Have I have 100% win

38:31rate on this.

38:33>> How did you get into the backtesting

38:35element of the research? Is this like

38:37Python or

38:38AI?

38:39>> So, I actually

38:40I actually vibe coded my own backtesting

38:43engine

38:44uh

38:45using options data. Uh let me show it to

38:47you. So, this is my backtest for Nvidia

38:51uh over the last 1 year. I tested a lot

38:54of different strategies. If I were to do

38:56an iron

38:58So, I tested multiple strategies, iron

39:01fly and iron condor, targeting different

39:03strike prices, different wings.

39:06And almost all the combination won four

39:08out of four times over the last 1 year.

39:12And they each have their average profit.

39:15They each have their

39:17uh return.

39:18So, like for example, if I were to sell

39:21an iron fly with 10-point width uh width

39:24wings,

39:25it makes 43% return on average in just

39:28an overnight trade. If I go with

39:3020-point wide, it makes 28% return.

39:33And if you traded this every time for

39:36the last 1 year,

39:38with just one contract, total profit

39:40would be $1,100.

39:42And in this backtest, I'm just opening a

39:44trade 15 minutes before market open,

39:46taking profit uh in the first 10 minutes

39:49at market open.

39:51>> Uh it's it's very kind of you to go into

39:53this detail and and reveal this kind of

39:56uh work that that you're doing. It's

39:57very nice of you. And it just shows you

39:59like

40:00with especially with artificial

40:03intelligence these days, you don't need

40:05to be able to code. You can You can use

40:08platforms and programs to build your own

40:10system. It just I mean, I don't know if

40:12you agree, Ravish. I do the same thing

40:13as you would. It just takes a curious

40:15mind. It just takes a little bit of

40:17curiosity and and answering some

40:19questions to

40:21to start getting to this point now.

40:24>> Yeah, absolutely. There are also you

40:26have to basically uh

40:29once you understand the Greeks, it like

40:32I said, it is going to open a whole new

40:33world. Because then you start to think

40:36about things like, "Hey, I can do this."

40:38Like when I first learned about data

40:40neutral delta neutral,

40:42I was obsessed. I was like, "How is that

40:44even possible?"

40:45That you can make profit without

40:48predicting a direction. My mind was

40:50blown.

40:53>> I think

40:54>> And now with AI now with AI earlier I

40:57So, I have a technical background.

40:59I used to code, do

41:01analyze data manually.

41:03Now I just you I know I can just write

41:05code this thing. I did this in few

41:07minutes without having to code my thing.

41:10And I can tell AI, "Hey, use this API,

41:12get this data

41:14and back test these 10 different

41:16strategies." And it tested like these

41:18seven strategies and all of them are

41:21winning.

41:21And now I just have to choose, "Okay,

41:23which one do I want to go with?"

41:25>> I mean, it's just insane how much AI's

41:28enabling average people to

41:31to have exponential growth, eh? I mean,

41:33but the thing is I don't like you've got

41:34to be racing with this AI technology

41:36because everyone's going to be doing it.

41:37So, you've got to be the the one best at

41:40it.

41:41>> Yeah, I mean, with AI um a lot of people

41:44do is go to AI and tell tell it

41:46basically, "Hey, dear AI, make me a

41:49million dollar strategy. Make no

41:50mistake."

41:52And that's not how it works.

41:54You basically have to give it your core

41:57idea and then it can improvise on it.

42:00And then it can test the data for you to

42:03let you know that, "Hey, it works."

42:06Like for example, there is another

42:08strategy which is a simple call buying

42:10strategy.

42:12Uh I also have a video on my channel

42:14about it. That strategy has a more than

42:1590% win rate.

42:17And on that video, you'll see hundreds

42:19of comments from people making a lot of

42:20money with that strategy.

42:22I use AI to test that data. What I did

42:25was I downloaded CSV data for um

42:29for QQQ stock.

42:32And I gave it to ChatGPT. I was like,

42:33"Analyze this data. I want to know that

42:35if I enter this

42:37enter buy this stock

42:40when the market drops 1%

42:42in the next 3 months, what is the

42:44average performance?"

42:46And it gave me data that 90% of the time

42:49if you buy when the market drops by 1%

42:52in the next 6 months, it goes up by 10%.

42:55It does not have to stay up there, but

42:57it goes and touches 10% level in the

43:00next 6 months.

43:02And then I created a simple call buying

43:04strategy where you buy a leap call with

43:061 year expiration

43:08and 50% profit target. That is working

43:10like amazing.

43:11>> That's totally crack-ass. That's totally

43:13crazy. I mean, the thing is though like

43:15it's so obvious. It's so obvious, but

43:17people aren't doing it.

43:19Like it's so obvious and it's so easy,

43:20but I

43:21The thing is right, so I have a question

43:22for you. Is everyone going to be

43:23millionaires in the future because of

43:24AI? Like but can any trader become a

43:27millionaire through AI in the next 5

43:29years, 6 years? What's your thoughts?

43:31>> I think anyone can become a millionaire

43:34if they are disciplined to learn and

43:37practice and manage the risk. Now,

43:39technically if you look at it

43:41there are a lot of people in the market.

43:43Some are billionaires. There are I

43:45recently went to Berkshire Hath Hathaway

43:47meeting in Omaha.

43:49Like I was dumbfounded that Warren Buff-

43:51We here we are talking about

43:52millionaires. Warren Buffett has built a

43:54trillion-dollar

43:56empire.

43:57Because he just gave it enough time and

43:59he was disciplined to keep it going.

44:03And there are a lot of billionaires

44:05there.

44:05And all of them are running like

44:07multi-billion dollar hedge funds, making

44:09billions of dollars.

44:11The difference between us and them is

44:13the skill and discipline.

44:15They have more experience, they have

44:17more skill, they have more discipline.

44:19So, if you can practice these three

44:21things,

44:22there is unlimited money in the market.

44:24You can make a lot of money. I think

44:26like even when we are thinking about

44:27millionaire,

44:28we are thinking small. The opportunity

44:31is much bigger.

44:32>> I think I feel inspired. I didn't expect

44:33that.

44:35I feel inspired by what's possible and

44:36it

44:37it's so it's so true.

44:40>> Yeah, I think going to Maha kind of like

44:42changed my perspective. Over there, I

44:44went to a private conference, which was

44:47invite-only. There were a lot of hedge

44:50fund managers there. Like Bill Ackman

44:52was there, Monish Pabrai was there, uh

44:55Guy Spier, a lot of uh big uh hedge fund

44:58managers that you hear about like

45:00operating at 100 million or

45:01multi-billion dollar level.

45:03They were in that room where there were

45:05like only 100 or so people.

45:07And uh going there kind of changed my

45:09perspective that there are levels to

45:11this game. Right now, we are thinking

45:13very small.

45:16>> But uh I mean, it's true. These guys

45:18like I was reading um I'll let you go

45:20back to the the other processes shortly.

45:21But I was I was reading a book by uh Ray

45:23Dalio. I don't know if you'll know. Ray

45:25Dalio is the he he's the CEO was the

45:28CEO. He's retired now of uh Bridgewater

45:31Capital.

45:32So, he's one of the the top hedge funds.

45:34And he He's got some books on debt

45:36cycles. But he he's made billions and

45:37billions and billions having one of the

45:38top hedge funds in the world at one

45:39point. And what's true what one of the

45:42first lines in the book that he said was

45:43is I'm not I'm not smart at all. I'm not

45:45smart at all.

45:47Uh

45:48I've made He said I made a lot of money

45:49by knowing what to do by

45:53uh not by not knowing the majority of

45:54things and just being able to work

45:56within the constraints of of what I

45:57know.

45:58And what he did is lot a lot of what

46:00you're doing and what I do now as well

46:01is he says me memory's terrible. I

46:03forget everything all the time. The

46:04multi-billionaire hedge fund guy says

46:06"My memory's terrible. Can't remember

46:07things." So, he just works with a system

46:09and it's that process, the repetition,

46:12working with a system,

46:14and he's reached multi-multi-billions.

46:18Just persistence.

46:19>> think once you Once you find Once you

46:22find an edge, once you find a system

46:24that works for you,

46:26then you just need to focus on it and

46:27keep it on repeat until it starts to uh

46:30it stops working. Eventually, like no

46:32strategy is going to have an edge

46:34forever. Some people do this mistake in

46:36backtesting

46:37um that they do a backtest for 10 years,

46:4020 years.

46:41Uh I think that is not wise because a

46:45strategy that worked 20 years ago might

46:47not be relevant today.

46:49It was a completely different market 20

46:51years ago. Today, we are in a very

46:52different market.

46:54So,

46:55you need to have a recency bias. Yes, I

46:57would like a strategy which is

46:58battle-tested for 10 years or more.

47:01But, what I want to know is is it

47:02working now? Is it working in the last 1

47:05or 2 years?

47:06So, I will have a recency bias for it,

47:08which is why

47:09I'm backtesting this strategy for the

47:11last 2 years

47:13because uh like 5 years ago Nvidia was a

47:15different company.

47:17Right? So, you need to have a recency

47:19bias.

47:20And uh you can just then use this data

47:24to do it. Now, I know that okay,

47:26I have done this strategy enough of the

47:28times for on a lot of different stocks.

47:31It's not going to work on every stock,

47:33but I know all the stocks on which it is

47:34going to work.

47:36Now, I can do that every quarter.

47:40>> But, yeah, but at the same time, it's so

47:42important to monitor your data, monitor

47:44the the results, the probabilities to

47:46make sure that something a trend isn't

47:48changing.

47:49Um

47:50It but it's it's really interesting

47:52because the market has a has evolved a

47:54lot. And when you're talking about no

47:56point checking back 20 years.

47:57Most people who invest just I dust color

48:00dust cost dollar average. It's like the

48:03strategy that everyone does the cost

48:04dollar average. But I was thinking I was

48:06looking at some charts in the 1930s

48:07after the Great Depression. If you

48:09dollar cost average in the 1930s, you

48:11you would have ended up losing 90% of

48:14your money.

48:15But then but then also in the in the

48:171930s the market would go up 20% in a

48:18month. It would have a 20% increase in a

48:21single month. It was it was much more

48:22volatile. We don't get those moves as

48:24much now.

48:25>> So we we just saw a move over the last

48:28one month where it was close enough to

48:30that.

48:31>> Uh the Q the Q an index I mean it the Qs

48:34>> went up like the Qs went up like 15% in

48:37in a month.

48:38>> Oh there you go. So maybe maybe things

48:40can crash maybe things can crash to 90%

48:43on the next crisis. Who knows?

48:45But but uh now you're right. The Qs the

48:47Qs after the um

48:51after the Iran threat. Are you talking

48:53about the Iran war threat? It dropped in

48:55and with the whole of the AI revolution

48:57the Qs have gone like 18%. That's AI

48:59though it owns half of the Nasdaq like

49:01it doesn't it? It's it's weird it's half

49:03of Nasdaq.

49:04>> When chat GPT came

49:07I bought a leverage ETF

49:09called TECL

49:11at $20.

49:13It's a 3x leverage technology ETF.

49:15At that point I was like I do not know

49:17which companies are going to be winner.

49:20But I think

49:21this AI revolution is going to be the

49:23biggest revolution in tech we have seen

49:26in our lifetime.

49:26>> Yeah. Yeah. Yeah.

49:28>> So I was like okay I'm going to put

49:29money in this leverage ETF 100k

49:31invested. I'm willing to lose.

49:35That is now close to a million dollars

49:36now.

49:37That stock that is now at $200.

49:42In just like three three four years.

49:45>> Like that's such an intelligent thing to

49:47do.

49:48>> So if you are

49:50if you if you put effort in your skill

49:53and you have discipline

49:55then then and you also need to have

49:57risk-taking ability.

49:59Now, people say that putting money in

50:01S&P safe.

50:03Like I showed you my account, my

50:05drawdown is lower than S&P.

50:09So, if you have lower drawdown than S&P

50:11and your returns are like exponentially

50:13higher

50:14your risk-adjusted returns are through

50:16the roof.

50:17>> Well, I think what you did with ChatGPT

50:20coming out and putting the 100K in the

50:22leveraged DTF was a

50:25it's an incredibly well-timed smart

50:27move. I mean, because it

50:29we knew when we saw ChatGPT, it was like

50:31nothing we'd ever seen in the world

50:33before. We didn't know how how it would

50:35advance or how fast, but we I I think

50:37when ChatGPT came out, we knew the world

50:40had changed forever and it was a matter

50:41of time.

50:43So,

50:44it's interesting. But, do you want to go

50:45back to your to the to the second

50:47strategy? I keep throwing you off the

50:49the PowerPoint, but it's it's

50:50interesting to talk to you, so.

50:52>> Yeah, let's go to the second strategy.

50:54So, now you're going to construct this

50:57strategy in a lot of different option

50:58structure. In the other strategy that I

51:01really like, which I think has a better

51:03risk-reward

51:05is I call it the theta machine.

51:08It's a time spread strategy.

51:10In a time spread strategy, what we are

51:12going to do is

51:14now think let me give you an analogy of

51:16like an Airbnb business.

51:19Think about this. I rent out an

51:20apartment. I'm paying $5,000 a month

51:23rent for it. And then I go list it on

51:26Airbnb for $500 a night. Maybe I have I

51:30sell 20 nights in a month. So, and I

51:33have some operational cost. So,

51:35basically I'm spending like $7,000 on

51:37this apartment all in and I'm pulling in

51:40$10,000 and I make $3,000 profit.

51:44I do not own the property. I do not have

51:46any significant investment in it. The

51:48only thing I have is a lease.

51:50Right? And I can earn a monthly income

51:53from it.

51:54We can do the same thing with options.

51:56Technically, if you wanted to do that

51:58with Airbnb, it's not profitable in

51:59today's time.

52:01But it is very lucrative and very

52:03profitable with options.

52:06So, what I'm going to do is

52:09uh

52:10So, there are a couple different types

52:12of strategies. One is calendar spread

52:14and one is diagonal spread.

52:16So, I really love calendar spreads. This

52:18is one of my best performing strategy.

52:21So, let's say

52:22I think S&P right now is trading at

52:25$740.

52:27I think over the next

52:29um

52:29few weeks it can go higher.

52:31Let's say I think that in the next 3

52:34weeks

52:35it can go higher. So, I'm going to go

52:37with

52:37Let's do it on Qs.

52:40So, okay, let's try try it on Qs. So, I

52:43think in the next 3 weeks Qs can go a

52:45little higher. I don't know how much

52:48higher,

52:49but I know maybe it is going to be

52:50higher than today.

52:52So, that means my time period is going

52:54to be

52:55I'm going to

52:57buy an option for 18 June and sell an

53:00option for 12 June.

53:02So, the way it works is

53:04we are going to buy a longer term option

53:07and we are going to sell a shorter term

53:09option against it. The term structure

53:11can vary depending on your trade

53:13outlook.

53:15So, the way it works is

53:17when you have buy an option, you are

53:19paying daily theta on it. Think of it

53:21like a daily rent.

53:23And when you sell an option, you are

53:24earning that daily rent on it.

53:26Now, theta is not linear. The way it

53:29works is that options which are expiring

53:32in near term

53:34are going to have higher theta decay

53:36versus options which are expiring in

53:38longer term.

53:39So, what I'm going to do is I'm going to

53:42sell a short-term option which is

53:44represented here in the red line.

53:47>> Yeah.

53:48>> And then I'm going to buy a long-term

53:49option which is represented in green

53:52line.

53:52Now the theta decay on the short-term

53:54option is going to be fast.

53:57And the theta decay on long-term option

53:59is going to be slower. So when we start

54:02there is like this gap between

54:04differential between their premiums.

54:06As the time passes, you see this gap

54:09grows.

54:10Because your near-term option is growing

54:12at a faster rate.

54:14As this gap grows, this is our profit.

54:18This differential is our profit. This is

54:19where our edge comes from. So as this

54:22gap is you we go through the time, the

54:24gap is growing, the profit goes up.

54:26That's how this strategy works.

54:28So and we can model it again using

54:31option strategy and see how exactly it's

54:33going to work. Now

54:35I do not know where the price is going

54:38to land, but I can use the Greeks to

54:41guide me for it. So what I will go is I

54:44will sell my short option at 20 delta.

54:48So 20 delta is going to be somewhere

54:50around

54:51$740.

54:53So this is at 23 delta. I'll go with it.

54:56So I'm going to sell a 740 call

54:59uh for June 12 expiry. And for the back

55:03week I'm going to buy 740 call at the

55:05same price.

55:09Now

55:10the way this it is going to work is I'm

55:12going to earn theta premium for it. Plus

55:15I have a direction. This is a bullish

55:17trade.

55:18In this trade we want the market to go

55:20to 740 strike.

55:23Now this says that there is 23 delta. So

55:26that means technically there is 23%

55:28chance of that happening.

55:30And uh

55:32and the price here uh the chance of

55:35profit here is 29%.

55:38So, it is still higher than 23 because

55:40we are getting theta premium for it.

55:43Now, if the price goes up slowly into

55:45this

55:46So, if the price goes up higher like

55:48this

55:49then in this trade we can make like well

55:51over 300% profit. In this trade our max

55:54loss is just $162. So, it is a very

55:57cheap and low-risk trade to put on.

55:59And the upside can be $618.

56:04So, I can make like more than 300%

56:06profit in this kind of trade.

56:08But, when I get into this trade

56:11I have to wait till here, till

56:13expiration to hit that bull's eye.

56:15But, I'm not going to be waiting till

56:17there because there are chances that

56:19market can go up and then come back

56:21down.

56:22Right? So, if it goes into 20, 30, 40,

56:2650% profit in a week

56:28I'm going to book my profit.

56:30And then I'm going to wait for another

56:31pullback and make this trade. So, let's

56:34say if someone made a trade like this

56:37just yesterday.

56:39Yesterday this option spread was trading

56:41at $100.

56:43Today it's $164. So, it's up 64% in just

56:461 day.

56:48So, with a trade like this we can have

56:51asymmetrical risk reward.

56:53And if you're taking profit early

56:56you can have a higher win rate.

56:59And uh

57:01sometimes if you want to wait for the

57:02maximum peak profit, you can also do

57:04that. I have had trades where I've made

57:06200%, 300% profit.

57:09Or if you want uh something with higher

57:12probability, you can reduce your strike

57:14price to 30 delta.

57:17So, 730 is going to be about 30 delta.

57:20And now we will have higher probability.

57:22Risk reward is slightly worse now. Now,

57:24this is

57:26um

57:27$194 max loss.

57:30Max profit $600. Still, it can be a

57:32multi-bagger trade.

57:34And all I need is the stock to go up a

57:36little bit. I can book profit at any

57:38point in this zone.

57:40>> So, just just make sure I understand

57:42this cuz this is a something I've never

57:44seen before. See, you're buying the 730

57:47call

57:48and then you're also selling the 730

57:50call, but the the call that you're

57:52selling

57:53you're you're selling earlier on because

57:56you want

57:58the better theta, right? And the one

58:00that you're buying is further out. So,

58:01you make money on the theta as as one

58:03thing.

58:05>> Yes.

58:05>> Um and then you also want the the stock

58:07to go

58:09because when the stock was towards the

58:10level when the stock goes towards 730,

58:13does it it doesn't really make

58:14Does it matter because one calls

58:16canceling out the other one? So, you're

58:18only making the theta, no?

58:20>> So, in this trade, you can make this

58:22trade a bullish trade, a bearish trade,

58:25or even a neutral trade. It all depends

58:27on where your strike price is. Strike

58:30price is basically your price target.

58:32If the price goes to your price target,

58:35that is where you make maximum profit.

58:37>> Yeah.

58:38>> So, you have bullish direction to this

58:40trade.

58:41Now, if I bring these strikes down

58:46So, if I bring these strikes down to

58:49$710

58:51Now, this becomes a delta neutral trade.

58:54Now, in this case, I make profit if the

58:57stock trades in this range.

58:59So, now I need the stock to stay flat.

59:03>> But But if you buy a call and sell a

59:06call at the same price, does that not

59:07cancel cancel it all out? Because

59:11you just done answered options.

59:14>> So, like I explained in the previous

59:16illustration there is a difference

59:18between deltas and thetas for the option

59:21at the same strike. For example, let's

59:24go back to the 730 example.

59:26So, on the option that we are selling,

59:29uh we are getting 32 delta.

59:32>> Yeah.

59:33>> So, but we are short selling this

59:34option. So, we are short 32 delta.

59:37>> Yeah.

59:37>> And uh we are theta positive here. So,

59:40we are earning $31 theta from this every

59:43day.

59:44>> Yeah.

59:45>> And the option that we are buying has

59:47higher delta.

59:48>> Mhm.

59:49>> Slightly higher. So, this is 35 delta.

59:52And here we are paying $29 theta. So, we

59:55can go here and this tool will show you

59:57aggregate graphics, um aggregate

1:00:00metrics. My total delta after the full

1:00:04spread is 2.6.

1:00:07My theta is $2.

1:00:09So, that means on a trade which is

1:00:11costing me just a little over $100,

1:00:14I'm going to earn $2 a day, which is

1:00:16basically like close to 2% a day.

1:00:18>> Yeah.

1:00:19>> And as we go closer to the expiration,

1:00:21this is going to increase.

1:00:23Now, 2% a day it does not sounds a lot,

1:00:26but if the price works your way and you

1:00:29are earning theta, the theta is going to

1:00:31accelerate.

1:00:32So, very high probability that I can

1:00:35make somewhere between 30 to 50% profit

1:00:37in the next 1 to 2 weeks.

1:00:40>> Yeah, that makes that that makes sense.

1:00:42And then

1:00:45you're making money on the delta as well

1:00:46because they've got different deltas

1:00:47based on the time that you put them on.

1:00:49So, you're making money on the delta.

1:00:51That that that calculation between the

1:00:53two deltas and the two thetas, you're

1:00:54making the difference

1:00:56as it goes.

1:00:57And the more time you leave it, the

1:00:58better because you're making money on

1:01:00the theta ultimately.

1:01:02>> Yeah. Yeah, I actually want the market

1:01:04to move slower, right? Typically, an

1:01:06option buyer wants the market to move

1:01:07fast for them to make profit.

1:01:10Here, I like it to move slowly. I want

1:01:12it want a slow grind grind.

1:01:15And then I can make profit.

1:01:18And if I make faster, if the market

1:01:20moves faster, let's say over the next

1:01:23Nvidia has blockbuster earnings

1:01:24tomorrow, the stock goes up to like 7:30

1:01:27over the next week.

1:01:28I'm still happy with 30 to 40% profit in

1:01:30a week. Then I can close this trade and

1:01:33open my next trade.

1:01:35So and if I'm neutral on the market, I

1:01:38can just do it at the current price. And

1:01:41then this becomes a delta neutral trade.

1:01:45And another thing, if I'm bearish on the

1:01:48market,

1:01:50I can do a put calendar. Here is I can

1:01:52go and sell 680 put, which is at 21

1:01:56delta.

1:01:57Now if the if now let's say Nvidia has

1:01:59bad earnings tomorrow, market drops,

1:02:03then this trade can this trade has

1:02:05potential to make 446% profit.

1:02:09So yeah, it has a low probability. The

1:02:12probability is 35%.

1:02:14But the upside is 500%.

1:02:17>> Yeah.

1:02:19So So when you on the earlier example,

1:02:21when you're talking about the Qs and you

1:02:22were put them in the 740s,

1:02:25so you're you're win a lot of money if

1:02:27it goes to the end of the theater or you

1:02:30if you hold the trade for a longer time,

1:02:32you make more money. If it reaches the

1:02:34740s, you make more money. What happens

1:02:37if it just doesn't move or it goes the

1:02:39wrong direction? Is that is that a

1:02:41that's a loss?

1:02:42>> So if it does not moves, uh so in this

1:02:46case,

1:02:47it all depends on what strike price we

1:02:49choose. If I want to be slightly neutral

1:02:52to bullish, let's say I want a trade

1:02:53which is slightly bullish,

1:02:55but gives me some uh downside

1:02:58protection. I love downside protection.

1:03:00I like to make profit if the stock moves

1:03:03uh up, but if the stock comes down, I

1:03:05would love some downside protection.

1:03:07Then I can make a trade like this.

1:03:09Uh where

1:03:11>> [clears throat]

1:03:12>> let's say I can make a trade at 715

1:03:14strike.

1:03:15It is slightly bullish. If market goes

1:03:17up, I make profit. If the market comes

1:03:19down,

1:03:21then my break even is 698.

1:03:24Currently, it's trading at 711.

1:03:27So, I have about 12 to 13 points

1:03:30downside protection

1:03:32against a drop.

1:03:34>> And how did you get that? Is that

1:03:35because you get the theta? Does the

1:03:36theta give you the downside protection?

1:03:38>> Yes.

1:03:38>> That's how you get the

1:03:39>> Right.

1:03:40Yes, now my theta is minimal. Now my

1:03:42delta is minimal, less than one.

1:03:45But my theta is higher.

1:03:47>> Yeah.

1:03:48>> And I can even do this trade with a

1:03:49shorter duration. Let's say I think I

1:03:51want to make a trade with just one week

1:03:53duration.

1:03:54I can make a trade like this

1:03:57where

1:03:58if the market stays flat, I make profit.

1:04:01If the market goes up, I make profit. If

1:04:03the market comes down a little bit,

1:04:05I make profit as long as it trades in

1:04:07this 701 to 730 range.

1:04:11>> Just to make sure make sure I got this.

1:04:12So, a lot of people might say, "I think

1:04:15that the QQQ is going to go to 740 and

1:04:18it's currently at 720."

1:04:20They'll put the call option on

1:04:22for 740, and then they'll just panic if

1:04:25it doesn't move towards 740 because

1:04:27every day they're losing money.

1:04:29But the way you do it

1:04:31means that you get the actual theta.

1:04:33That means even if the stock doesn't do

1:04:34anything, I'm making theta right now.

1:04:36So, you get paid to wait a bit more.

1:04:38>> Exactly. We are getting paid while the

1:04:41price moves our way.

1:04:46>> I don't know why more people don't do

1:04:47this.

1:04:48>> Because people don't know about it.

1:04:52>> [laughter]

1:04:54>> It's fantastic. I absolutely love this.

1:04:56It's it's because it's it's not rocket

1:04:58science. I mean, it's just putting one

1:05:00more call

1:05:01on onto the option that you are going to

1:05:03put anyway.

1:05:05>> Yeah, I would

1:05:08I mean, this is why my account has such

1:05:10low drawdown because I use strategies

1:05:12like this.

1:05:14And if there is another there are levels

1:05:16to it. There is next level is I can buy

1:05:18both call and put calendar

1:05:20and make profit both ways.

1:05:23I don't even have to predict the market

1:05:25direction.

1:05:27>> Yeah, you can literally be paid to be

1:05:28wrong. You can you can be paid to be

1:05:30wrong or you can be paid when the stock

1:05:32does nothing.

1:05:33You can just sit there and make money.

1:05:35>> Yeah, exactly. And in a trade like this,

1:05:37if you are right, you can make a lot of

1:05:39money.

1:05:40If you're wrong, your loss is actually

1:05:42pretty small. You can do these kind of

1:05:44trades with as little as $100 to $200.

1:05:47So, even if you have a small account,

1:05:50you should never buy call. This is the

1:05:52way to go.

1:05:54>> That's crazy. But and obviously the only

1:05:57way you lose is if you get it completely

1:05:58wrong, which when you're buying the

1:06:00larger cops larger cap stocks on a on a

1:06:02bullish market, it's

1:06:04if you buy in decent companies in a

1:06:05bullish market, it's not often that

1:06:07you're going to get a the stock will

1:06:09completely the wrong direction. And if

1:06:10it does, you just buy more.

1:06:12>> And you can the great thing is

1:06:14you can do this kind of trade for any

1:06:16trade duration.

1:06:18If you think you need 3 months, you can

1:06:21do a 3 months long trade.

1:06:23And

1:06:24and you just use the delta. Just sell

1:06:26between just buy between 20 to 30 delta.

1:06:30There is very high probability that

1:06:31eventually the stock price is going to

1:06:33go and touch it.

1:06:36>> And and say if you buy it a month out,

1:06:37what's the what's the spread between the

1:06:39options there? If if you're buying a

1:06:41month out, you buy like

1:06:43uh is it like or you can tell me you'd

1:06:45buy say it's

1:06:47Google whatever 400 calls

1:06:49and you want it to reach 400 in a month.

1:06:52How would you position those?

1:06:54The buy and the sell call.

1:06:56>> Right. So, if I think I want to buy

1:06:58Google, I can make a trade like this,

1:07:00which is 4 weeks out.

1:07:03And um

1:07:05I will sell

1:07:06a 400 call for June 18

1:07:10and buy a 400 call for the back month.

1:07:13And in this case, my max loss is just

1:07:15175.

1:07:17Max profit can be 575.

1:07:20Huge asymmetric risk reward.

1:07:22And even if it stays flat,

1:07:26I can still make profit. So, let's zoom

1:07:28in a little bit. So, let's say I make

1:07:29this trade and the stock does not moves

1:07:32at all, it stays flat for the whole

1:07:34month, you can still make close to 50%

1:07:36profit here.

1:07:38>> So, just to get this right, you buy you

1:07:39buy the call saying June and then you

1:07:41you'd sell you'd sell the call

1:07:44or it's the other way around. You'd sell

1:07:46the call in June and you'd buy the other

1:07:47one in July. Is it like that?

1:07:49Or is it the other way around?

1:07:50>> Yeah. Well, yeah. So, we sell a short

1:07:53term. So, let me go back to this graphic

1:07:55again.

1:07:57>> Uh you sell a short term

1:07:58>> Yeah, I link short term and we are

1:08:00buying long term.

1:08:01And we make profit from the difference.

1:08:04>> And is there ever a point where you just

1:08:07let the short term

1:08:09expire and then just hold hold the long

1:08:11term to keep going or you always close

1:08:12together?

1:08:14>> So, usually I don't. Usually, I close it

1:08:17for profit before expiration

1:08:19uh because in that case um

1:08:22uh

1:08:24because usually when that happens

1:08:26um

1:08:28this is uh okay, I close it for uh

1:08:30because if the short leg expires, then

1:08:33I'm just holding a long call.

1:08:35Then I'm paying theta for it.

1:08:37I don't want to pay theta.

1:08:39So, which is why I will close it before

1:08:41expiration, but sometimes I see my

1:08:44trades

1:08:45which I was happy to take close for 50%

1:08:48or something profit

1:08:49after my short call expired,

1:08:52long call went parabolic.

1:08:54And it went up 300% 400%. So, there are

1:08:57scenarios like that.

1:08:59But, that's not the game I'm playing.

1:09:02I want consistent returns. I'm

1:09:04compounding week over week.

1:09:07My account is compounding at 8 to 15% a

1:09:09month.

1:09:10And with that kind of return, with such

1:09:13low drawdown,

1:09:14in 2-3 years it's going to it can go to

1:09:17eight figures even.

1:09:18>> The This is genius for me. It's totally

1:09:21genius. Um And the best things that I

1:09:24generally like genius strategies are

1:09:26that they're so simple

1:09:28and they're so simple and beautiful to

1:09:30execute, but it's nothing nothing too

1:09:32complicated, is it? It's not too

1:09:34complicated. I mean, I've understood

1:09:36everything you've said in in a 50-minute

1:09:37session.

1:09:39>> Yeah, exactly. Because um

1:09:42because the way when people try to learn

1:09:44it is

1:09:45they start they get intimidated by a lot

1:09:48of things because nobody really breaks

1:09:50down in such simple terms.

1:09:52Uh they talk about Greeks and all those

1:09:55things and uh charting and technical

1:09:57analysis. It was intimidating to me also

1:10:00initially.

1:10:01But what I figured was that instead of

1:10:04learning everything like a reading a

1:10:06full textbook,

1:10:08focus on a couple of strategies and

1:10:10master them.

1:10:12And after some experiences, everything

1:10:14starts to make sense to you. Then it

1:10:16becomes second nature.

1:10:18Options is all about the probability.

1:10:20The reason why a lot of traders lose,

1:10:23even if you give them a profitable

1:10:25strategy,

1:10:26they don't understand the expected

1:10:28value. They don't understand what the

1:10:31risk is, what the reward is, what's the

1:10:33win rate, how does that affect their

1:10:35overall profit and loss.

1:10:37With options, you get it up front,

1:10:39right? You get up front.

1:10:41That this much profit it can make. This

1:10:43is your maximum side potential. This is

1:10:46your chance of profit.

1:10:48It is all baked in the data.

1:10:50And with tools like this, it makes it

1:10:52very easy to understand.

1:10:54So, I did not learn options by reading a

1:10:57textbook or by watching a lot of videos.

1:10:59Yeah, I did watch a lot of videos on

1:11:01YouTube on Theta profits uh

1:11:03on Tastytrade channel, and I learned a

1:11:06lot of strategies from there.

1:11:07But, you basically learn by doing. It's

1:11:10math.

1:11:11You do not learn math by theory. You

1:11:13learn it by doing.

1:11:15So, you have to put it in practice. I

1:11:17would spend I used to spend a lot of

1:11:18time. I still do.

1:11:21Going into this tool and modeling

1:11:22different trade ideas and see how they

1:11:24work.

1:11:26And there's another great thing in this

1:11:27tool. Once I make this trade, I can just

1:11:29save this trade.

1:11:30And this is like a paper trade now. Now,

1:11:33it is going to track it in my account on

1:11:35how this trade works.

1:11:37And you can even go and see its chart

1:11:39and see how it's working.

1:11:42So, let's say you bought this call

1:11:44calendar on Google 1 week ago

1:11:47when it was trading at a higher price.

1:11:49Even though the stock price has come

1:11:50down, you can see

1:11:53that the options has not lost any value.

1:11:56Stock price came down,

1:11:58but you you're still flat on your trade.

1:12:02This is why it works so well.

1:12:04>> To just to close it out, I guess do you

1:12:06have any

1:12:07final thoughts about how someone else

1:12:09can get started and and

1:12:12they not they don't have to You've heard

1:12:13of Black-Scholes formula and the the big

1:12:15the big black book of Black-Scholes

1:12:17formula and the book They don't need to

1:12:18read that.

1:12:20>> I think that is what makes it

1:12:22intimidating for people because they

1:12:24hear about all these complicated

1:12:26formulas. But, with tools like this, you

1:12:28don't have to

1:12:30go deep into it.

1:12:31You can start with just focusing on

1:12:33delta and theta

1:12:35and start to make some paper trades.

1:12:37Basically, understand how it works.

1:12:40And you will learn by experience.

1:12:44>> That's been incredible. I think this has

1:12:46been one of the the episode where I've

1:12:48learned the most and and had my eyes

1:12:50open. So, really really appreciate you

1:12:52delivering all of this this knowledge

1:12:54and information. It's so valuable.

1:12:57Thank you for giving back, and thank you

1:12:59for being transparent. Do you have any

1:13:00final thoughts or anything else you want

1:13:02to close in on?

1:13:03>> Um yeah, I would say

1:13:06uh one of the biggest problems that I

1:13:08see with a lot of traders I work with,

1:13:11they learn a new strategy, and they are

1:13:14excited they are thrilled with it with

1:13:15it they are very enthusiastic about it,

1:13:18and then they start to make big trader

1:13:20big trades right off the bat, and they

1:13:22lose money, and they think that the

1:13:23strategy does not work. They hop onto

1:13:26another strategy, do the same thing,

1:13:28which is why a lot of traders can spend

1:13:30years chasing different strategies and

1:13:32losing money.

1:13:34But what you need to do is trade small,

1:13:37and give it time.

1:13:39I don't If I learn a strategy,

1:13:41I don't mind trading it for 3 months or

1:13:44even 6 months with just one contract,

1:13:46risking couple hundred dollars on every

1:13:48trade.

1:13:49Because if it works for me over that

1:13:51period, I will make 20 to 50 trades with

1:13:54that strategy. If I'm winning most of

1:13:55them,

1:13:57that gives me a good understanding of

1:13:58yes, this is profitable,

1:14:01and then I have rest of my life to use

1:14:03that strategy, and I can compound

1:14:05compound it.

1:14:06You don't think of it in a way that I

1:14:08learned this, I need to make all the

1:14:10money today.

1:14:11Start by practicing it. Take it slow.

1:14:14You We people People spend 4 years going

1:14:17to college, spend six figures in

1:14:19tuition,

1:14:20and then they do internship, then they

1:14:22work at a job for few years. It takes

1:14:24them 10 years to build a career where

1:14:26they are at a point where they feel that

1:14:28they've achieved some level of success,

1:14:30but with trading, people think that they

1:14:33should do it in a week.

1:14:35It's It does not work that way. So, you

1:14:37have to develop your skill and be

1:14:39patient. It's not going to take 10

1:14:41years. Most people, if you have the

1:14:43right direction, you can learn it in 3

1:14:45to 6 months. And I think if you put in

1:14:48that level of effort and discipline, it

1:14:50can be life-changing.

1:14:51>> Where can people find you if they've got

1:14:53any questions?

1:14:54>> Yeah, you can reach out to me on I have

1:14:55a YouTube channel called Options with

1:14:57Ravish, and I also have an Instagram.

1:15:01It's called Hey Ravish. You can search

1:15:03or find the link in the description.

1:15:06>> Thank you so much for your time, Ravish.

1:15:07It was absolutely amazing, and you've

1:15:10delivered tremendous knowledge that I'm

1:15:12sure is going to change a lot of

1:15:13people's lives.

1:15:15>> Thank you, Stephen. It was a pleasure

1:15:17speaking with you.