John Carter: Trading options, volatility, hedging, & Fibonacci extensions // simpler options trader stocks commodities interview david moadel
welcome to looking at the markets with
David Modell today I'll be speaking with
mr. John Carter a well-known and highly
esteemed trader of stocks options and
commodities mr. Carter left corporate
America to pursue full-time professional
trading in 1998 his media appearances
and YouTube videos are extremely popular
and informative currently mr. Carter is
the president and CEO of simpler trading
dot-com and simpler options dot-com
thank you for joining me today on
looking at the markets hey David it's a
fantastic being here and looking forward
to your questions
absolutely I'm looking forward to your
answers so I'd like to start at the
beginning and how you first got into
Finance and options trading I read that
you doubled your money on your very
first options trade with calls on Intel
is that true it's true I'd like to say
that I did that on purpose
and I use skill but that is not the case
at all I had come home one night after
working is toward the end of the summer
and I came home one night I'd been
working all summer in a at the mall I
think was a cookie company making in you
know four bucks an hour minimum wage I'd
saved up like a thousand dollars after
the summer and when I came home my
father and some of his friends Sunday
night we're sitting around the table I
don't know if it was an investor's
business daily or Wall Street Journal
but I heard him say something about wow
we could double our money and I stopped
and turned around said what do you guys
hey what you guys looking at if you
don't mind me asking and they started
talking about like I didn't know Intel
what that was I don't know the company
but the short version is is like hey
yeah intel has earnings we're gonna buy
these call options for run-up in
earnings I had no idea what they're
talking about I'm like can I get in on
this so obviously I couldn't open up an
account but I said okay look here I
wrote my check out here's a thousand
dollars and some one place this trade
for me in there
and I said sure and I mean essentially
you know if I lost the money I'd be out
so a couple weeks later I got my
original thousand dollars back plus
another $800 so nearly doubled and the
big thing that stood stood in my mind
was that I had just spent the entire
summer slaving at a crap job for $1,000
and now in this case based on an idea
based on research I was able to make
nearly the same amount of money doing
absolutely nothing except from an idea
and at that point I was hooked
understandably hey why go back to
working your butt off when you could do
it this way I like I like that story
that's really inspirational
now you're associated let's go to the
present time with simpler trading calm
and simpler options calm links are in
the video description what's the
difference between the two and what will
people find when they visit these
websites sure simpler trading is really
more of a hub so you know if you go to
like simpler trading and you'll see like
simpler options and simpler futures and
so then we just kind of you know divvy
up I personally prefer trading options
you know I'm about 70 to 75% of my
trades run options the rest are kind of
futures and some stocks but the idea is
it's just kind of if somebody wants to
learn more about it or get actionable
ideas there's always theory and
hindsight is great but we kind of lay
our reputations on the line saying look
this is what we're doing right now this
is what we're doing tomorrow this is how
it worked and that's that's what we do
on those sites and so the idea is that
if you're newer there's some education
there to get you up to speed some of it
free some of its premium and then if you
are say intermediate to advanced and
you're just looking for some trade ideas
you know we've got some very powerful
scanners that we use those are also
available on the site there's so much on
these sites I just wanted to mention I
mean I'm looking at it right now simpler
options for example has free videos
knowledgebase recordings I mean just
great stuff here so everybody needs to
check out both the free resources as
well as they subscribe
Asians that are available now I wanted
to talk about volatility in the markets
now most people associate volatility
with fear but I get the feeling that you
actually look forward to market
volatility is this true and how can
traders take advantage of volatility
well from a trading perspective
market volatility market volatility is
fantastic and the thing about what I
found is that you know you can the great
thing about trading is there's a lot you
can Google how to do an iron Condor and
you can learn how an iron Condor works
but what you don't know is when it's
appropriate to use that and when
volatility increases you just have to
understand which strategies work the
best in those markets the bottom line is
is that I love volatility I like I like
the idea that you know the idea that if
you have a safe quiet you know bull
market that breeds complacency I want a
market where people are nervous I love
the fact that the headlines right now
are all bearish and people worried about
political risk and it's just it creates
an environment with lots of opportunity
and the beautiful thing about being a
retail trader okay is that and the
reason retail traders there's there's
edges that we don't have but the edge
that we do have is liquidity okay a
large hedge fund cannot go in and do
like a four or five hour trade on you
know best buy like okay I'm gonna buy
some options and then flip them out they
have to only consider positions that can
take you know sometimes weeks and months
to build up and weeks and months to get
out of and so we have a niche that's
really fantastic for making what I would
call out size gains that hedge funds do
not have they do not have that same
opportunity yeah I crave volatility as
well I might be a volatility addict I'm
not sure I need to go see somebody about
that so you know I I recently had the
pleasure of speaking with miss Carolyn
Borden aka the Fibonacci Queen and
you're also known for having expertise
in this area now what's special about
the FIB retracement levels I've got to
memorize myself 23.6% 38.2%
1.8 and how can traders use these levels
to their advantage so in for Fibonacci's
and i learned all that from carolyn by
the way she's been my guru in terms of
learning Fibonacci's and extensions i
prefer most of my work is done on the
extensions so i you know a stock can
pull back it can pull back you know
three two it can pull back 50% it can
pull back six one eight but where I
really like those is for the you know
the targets you know if it busts out of
a trading range to the upside or breaks
down of a trading range to the downside
man those one two seven two extensions
are some of the highest probability
targets out there and the biggest
mistake I see people making in the
markets is they'll get into a position
and then either one they sell too soon
or too what's worse is they get into a
winning position thinking that's going
to go on forever and they don't know
where to get out
so in trading it's the exits that make
you money and those Fibonacci extensions
especially the one two seven two and the
one six point eight or where it's that
there's just something about those
numbers that just seems to work and
that's great advisement right there
don't just use the retracements also
look at the extensions which is
something we all need to work on now I'm
looking right now at simpler options
calm and I see there's a seven dollar
trial that's great what can you tell me
about that so so the trial is the idea
there is we want to build up a trading
community and so we have set it up where
we have a live chat room it's like a
webinar that goes on all the time that
the markets open combined with text
alerts so if you're working full time
you don't have time to sit in a chat
room all day we text out the trades that
were actually doing entry and exit um
and the whole idea there is it's a
community and so my vision with this is
that is if you get a roomful of say
traders who are kind of all educated
they're on that they're they're you know
maybe different levels but they're
looking for different things what
happens is it becomes an idea generation
tool so some of the best trades I've
done this year were people that post it
in the room like hey have you looked at
moma I'm like no I haven't I've been so
focused on Amazon that turned into one
of our best trades of the year and so
the whole idea with this is it's it's as
a port of community there's different
points of view the traders in the room
help each other out
and and if you're just looking for trade
ideas with specific entries and exits
it's also that and some people want to
learn how to fish other people just want
the fish and that's fine yeah so what I
like about that is that you're not just
talking the talk you're actually these
are trades that you're actually making
with your own money and that's fantastic
so seven dollar trial you can't beat
that again people really need to check
that out it's simpler options calm now
for traders with short attention spans
like me weekly options are a godsend
however some people view the weeklies as
high risk are the relatively low risk
ways to profit from weekly options so
I'm a big fan of the weekly options as
well one thing that you might consider
is looking at bi-weekly options
meaning that okay if it's today's
Wednesday instead of trying to sell
options that expire in two days sub ones
that expire at the end of next week
gives you a little bit more flexibility
plus you get that weekend decay but that
being said with weekly options today is
a good example Amazon and Google are on
a raise to a thousand dollars a share
and as what by the time I think I we got
on this call Amazon was trading it like
997 well that's a great way to use
weekly options you can get you know you
can get close to that strike price with
a low Delta and participate in that
movement so I am a fan of weekly options
for some of those especially those
bigger stocks and catching some of those
moves but I found a real sweet spot
selling options that are the next week
out you know on a Tuesday or Wednesday
go out for the next week and it gives
you a lot more juice you know a lot more
premium plus you get that weekend decay
plus you get a little bit more extra
forgiveness if you need to work your way
out of that trade yeah you can manage
your trades a little more easily when
there's a week and a half left as
opposed to just a few days for sure I'm
gonna have to look more I myself I'm
going to have to check out those
bi-weekly options take a closer look at
those now with the disclaimer that we're
not giving investing investing advice
and we're not making any recommendations
to buy or sell anything here's the the
question everybody wants to know are
there any stocks companies or sectors
that you are bullish or bearish on for
the remainder of 2017 that's so the only
loaded part there is the remainder of
2017 right you know my sweet spot is
always a couple of weeks but that's a
fair question so I do think that so for
the markets and what's interesting is
the traders I'm a closet fair like the
downside of the market is way more fun
than the upside so it goes markets go
down a lot faster that being said you
never want to be bearish just because
you know a bad news or because stocks
are too high etc etc so in terms of
stocks and sectors for the rest of the
year of what's been interesting me
interesting to me the most this year is
that and this is kind of a it's not
really a specific sector but it's a
specific category of stock and I'll tell
you exactly what it is I look for stocks
that have a short interest of over 20%
and are within 10 percent of new
all-time highs and when you get that
combination and what I found in stocks
that recently put that example are you
know Momo best buy there's I mean
there's been a lot of them this year
where what happens is once they get that
close to new highs the shorts that are
in that stock get nervous and start to
buy so you add you got the shorts who
are covering which provides upward
acceleration plus you've got new buyers
coming in and those stocks have
exaggerated moves which is fantastic
when you're buying options so if someone
said to me John there's only one type of
trade you could do the rest of the year
that would be it so it's not a specific
like oh I'm just going to buy energy
it's specifically looking for that
situation I thought I've heard it all
but that's a formula I have not heard
yet fascinating so just to repeat yeah
just to reiterate so 20 percent or
greater short interest and within 10
percent of the all-time highs that the
formula that is the formula now to find
that stuff you can go on a stock you
know there's free sites like thin biz
there are where you can look at short
interest stocks you can look at at Yahoo
Finance we do have a stock scanner that
screens specifically for that and that's
that and that's what I use but it's one
of those where if you can do some
hunting
pecking you can find it on your own as
well yeah fantastic actionable ideas
right there just a couple more if I may
with the with the major US market
indexes near all-time highs as we all
know would it make sense for traders and
investors to go light on equities and
start hedging right now
should they hedge with GLD SLV TLT or
even T VIX something like that so so
here's um and that's a really good
question and I get that a lot and here's
the way I look at that is that nobody
knows when a trend is going to end do I
think that the markets right now are
kind of ridiculous yes but I also traded
during the late 90s and I saw that
bubble like I don't we actually haven't
seen that yet if it's going to happen so
my mantra is that the trend is your
friend until it ends and so meaning that
trying to you know anybody who's been
trying to pick tops this year is getting
destroyed we don't know when this
markets gonna top maybe it's topping
today maybe it's going to be at the end
of 2017 you know we just don't know so I
here's the way I look at that is that
you want to hedging is kind of a
double-edged sword because if you're so
well hedged not going to capture any
games so one way to hedge is just to
lighten your overall exposure so there's
a couple different ways to look at this
so one it's like if you're say you've
got fifty percent cash 50 percent
equities and you're nervous okay well
you could just buy some puts on the spot
S&P 500 now a lot of funds are doing
that and those puts expire worthless
week after week after week and that's
fine that's their insurance you just
want to make sure that the you know the
money that you're losing on those puts
isn't offsetting any games that you're
making in your lungs because if that's
the case you might as well be flat right
one good way to hedge is to be long the
yen so you can do that with an etf
symbol FX I think it's F X Y I was or FX
J but I think it's FX Y it is FX y and
so you can buy calls on that and what's
nice about it is that if the market
suddenly tanks that will typically spike
higher and what's also nice is that if
the markets going up sometimes I just
trade sideways so what I found is that
that's a good overall head you know
obviously if you trade futures you can
just be
young futures not to be confused with
Forex which is dollar yen which goes
down okay
yen features go up dollar yen goes down
so hopefully that's not confusing but
what I'm looking at is the yen futures
to hedge there again something I've
never heard before I thought I heard it
thought I heard everything hedging with
the yen FXY a freely tradable ETF there
I just looked it up on Google Finance
while we were talking there it is very
nice yeah I'm gonna check that out
and I imagine it doesn't have a decay
that TVI XOR VXX one of those would have
so correct and the the implied
volatility is really low if you check
out like last Wednesday when the markets
you know that 40 points out from the
espys check out what FX y did and that's
that's the kind of stuff where it can
pay for itself yeah I see it
fascinating Wow all right I'm gonna
start using these oh good yeah fantastic
mr. John Carter I've got you here on
Twitter @ @ jf Carter is that correct
that is correct and are there any other
social media sites that we should be
checking out that's kind of a main one
I've been I've been kind of slow to
social media I mean I'm trying to figure
out Instagram and some of those most the
time I'm just trading right but Twitter
twitter is a good place I mean that's
where I'm putting posting just like some
different things I'm doing and stuff
like that as well gotcha and of course
people could always visit simpler
trading com simpler options calm links
in the description are there any other
ways people can contact you if they'd
like more information the best thing to
do is if any of this stuff looks good I
mean I've got a book out called
mastering the trade it's a little old
but it's got you looking some good stuff
in it I would suggest if any of this
stuff resonated with you you know try
out or trial I mean if I can get 7 bucks
use that 30 days to milk all the
information that you can out of us and
then go do it on your own which is
totally fine I'm more about just kind of
providing value the whole idea of you
know our subscription program is to
create a community and the community
obviously should create an amazing ROI
on the money that you're investing in it
and if either stop resonate with you I
encourage you to do it and if not
there's tons of other stuff out there
and I wish you the best for seven bucks
at a trial you cannot go wrong
so why not just check that out there's
you know there's so much more to
learning how to do this than just
watching a couple of YouTube videos even
this one mr. John Carter I'm so pleased
that I got to speak with you today I
can't wait to put this out on YouTube
thank you so much I really appreciate
your time today
thank you David you're a good
interviewer thank you for watching
please like comment and subscribe and
I'll see you next time