Karen the Super Trader

By Larry Jacobs - Editor of Traders World Magazine

Karen by her videos below has made an outstanding return in the markets using options. She does it with apparently just a very simple trading strategy. She has been on TastyTrade.com three times now and a lot of our subscribers have asked about her method of trading.

See the three videos below:

Tom Sosnoff interviewed her in all three of the videos. An interview with Tom by myself will be in the new issue of Trader World Magazine.

From listening to the videos she started with just a small amount of capital and turned it into hundreds of millions of dollars. Her method is to collect income directly from writing mostly naked options. From what I understand is that she writes naked puts near the bottom of swings and sells naked calls near the tops of swings. She used Bollinger Bands and Fib numbers for timing. 

She mostly now just trades the S&P 500 index (SPX) calls and puts. 

She runs two funds. One is for her clients and the other is for charity. Part of the profits of the first fund goes into the charity fund. 

She uses the Think or Swim platform and trades the 12% out of the money puts and 10% out of the money calls. She shorts the naked options when they have a lot of implied volatility. These options are put on at the sweet spot that's when they will have a rapid decline in premium. This time decay of premium is basically know as theta.  

I think I understand how she uses the Bollinger bands. The strike prices that she puts on are at the edge or slightly out of the Bollinger Bands. See the chart below. If the position moves against her then she will put on even more, which is a double down strategy. The Bollinger Bands are set at 2-diviations on a 20-day moving average. 

Here is a chart of the SPY and this might be where she places her option trades. Selling naked puts at the bottoms and sell naked calls at the tops of the Bollinger bands. This is my estimation of what she does, but can't be confirmed.

chart

She says in her videos that she places the trades on at 56 days to the expiration of the options. This is known as the sweet spot. 

theta

Karen keeps her eyes on implied volatility and writes the options when volatility is rich and takes them off when it is cheap. She uses a technique to mitigate risk and to avoid her Lick (Net Liquidating Value). Lick is applied to upfront option premium-paid cleared by the exchange. 

Before Karen become a trader she was an accountant and seems she knows really knows numbers. She may be a mathematical genius. She seems to really know her business and her apparent profits seem to prove that she knows her stuff. She seems to be very confident. Her technique might be considered by many to be very risky. It also seems to me that she might use a lot of sixth sense. Karen is very matter of fact about her business. She sees the returns as numbers but does not take trading personally.  She has a strong trader mindset and seems confident in her style. 

I congratulate Karen on her success and wish that she continues on the same path. 

I have a message relayed to her that I would like to interview her. I have not heard anything back yet. I am like everyone else, I enjoy hearing success stories that this one. 

Gives us your opinion join the Traders World Magazine discussion group at Linkedin.com

Also understand the risks of trading options.

 

 

 

 

 

 

 

 

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