Transcript

Clay: This is The Stock Trading Reality Podcast, episode 226.
Announcer: This is The Stock Trading Reality Podcast, where you get to see the realistic side of a trader’s journey. Get inspired and stay motivated by everyday normal people who are currently on their journey to trading success. And this is your host, he would like to make one request to the YouTube comment section professional traders, Clay Trader.
Clay: I mean, is there just one, just one … If you would be willing to make a video and just show me how to actually do it? So that’s my one request. Just please, make a video, and I’m not saying you have to start a channel, but just make like a video and show me how I correct, or how I should correct what I’m doing or how you would have done it when hindsight is not in your favor, and that would be very, very appreciated on my part. It’s one of the things that … I’ll be honest, we’re at episode 200 something now, whatever. It is what it is. It used to bother me and it used to really just get under my skin because … Let me take a step back and set up some context if you’re not familiar with my YouTube channel.
Clay: On Tuesdays, I put out a live trading video where it shows me trading live, winners, losers, screw-ups, all of that sort of stuff. Totally unscripted, but with this you get people that, “You’re a terrible trader, you should have done this, you could have done that,” all of this sort of stuff. Now, I should also … I don’t want to be a drama queen here because, I don’t know, probably like 95% of the comments are awesome, like, “Hey, thank you for posting this. Hey, I appreciate your transparency. Oh, that sucks, you screwed up, but hey,” just supportive, but you always have the 5% of people that basically proclaim that they’re like professional traders.
Clay: And that’s fine. I’m not refuting the fact that they’re not professional traders, I just wish one of them at some point would just help me out, then, because in their world I’m terrible but they never do that. And as soon as you question them … I don’t know. Now, of course, I’m saying a lot of this in tongue in cheek because, like I said, it bothered me at one point. It kind of rubbed me the wrong way, but now, you’ve just got to learn to laugh and that’s what I’ve done, and I like to have fun with them going back and forth a little bit. Sometimes it’s also hard to tell, “Is this person serious? Are they trolling?” But there’s give and take a little bit, but welcome to the world of YouTube.
Clay: And I also bring that up not necessarily because you want to start a trading channel or anything like that, but just really in life, in social media, you have to realize that you can’t let people get under your skin like I used to let them get under my skin. You got to learn to just kind of laugh about it, have a sense of humor, hence this fun fact, and just kind of roll with the punches because when you can hide behind a computer screen you can be whoever you want to be. You can say whatever you want and it is what it is type of situation, so don’t let that stuff get to you because, like I said, I self admit it used to get to me, but then it finally kind of just dawned on me, “Why?” One of those, if they’re such good traders, why are they spending their time watching my videos and then critiquing them and telling me how terrible of a trader I … as such a successful trader, shouldn’t they be like out on their yacht or something like that?
Clay: But, you know, like I said, you’ve got to just have a personality and sense of humor about it. And I promise that sort of stuff, it will take you very far in life. So even if somebody’s talking behind your back, in person. Just trust me, the problem is on their end. We have a great episode discussion here. We have a welcome back episode episode, and Diego is back and I really don’t want … There’s not much I need to say, because he goes into a summary and I will say this, and I mention in the interview but I really like his humility, because I ask, I’m like, “All right, give me the good stuff of your story.” And I mean, he still gives me stuff that’s relevant, but it’s not like the good stuff.
Clay: But Diego is somebody that really stands out to me, because he is somebody where whenever I have the voices of maybe self doubt or life is so hard, woe is me, I can’t do it, why is everything … When any of those self pity type voices show up, Diego is one of those people that I always think on, because his story is something else. And I do touch on the key points, but Diego not only refreshes us on his first part of his journey, but then we get caught up and he still had some more painful lessons to learn. He mentions at one point, “Yeah, Clay, you told me, ‘You better be careful, Diego, you might be getting a little too over confident.'” But to his credit, and why I totally respect him, he basically says, “Yeah, and I didn’t listen, I kept pressing forward.”
Clay: And that let to him to some areas that he probably didn’t want to go. Including one situation where he literally thought that he had blown up his family’s finances, but I’ll just leave it at that. Great discussion so let’s get to it, here is myself and Diego.
Clay: Diego, welcome back to the show.
Diego: Hey, hello Clay, thank you, thank you for having me again.
Clay: Now, I’ll be honest. Is this your second or third time back? [crosstalk 00:05:12] I have lost track.
Diego: This is my second time. And, been almost a year and a half, it’s been since like December 2017.
Clay: Do you happen to remember what episode number that was off the top of your head?
Diego: Yeah, actually I checked this morning, it was episode 150.
Clay: 150.
Diego: Yeah.
Clay: Okay, so for you listeners out there, episode 150 if you want to go back and get context. Now, let’s see, Diego, I do know that I’ve met you, I for sure I remember meeting you in Denver. And did I meet you in Florida, too? You were at the Florida one, right?
Diego: Yeah, I was there. That was actually my first one.
Clay: Okay, that’s what I thought. So I’ve met Diego in, at our inner circle meetup in Fort Lauderdale, Florida, and then in Denver, Colorado. And Diego, I would highly recommend all of you go back and listen to episode 150, because Diego is one of those guys where if you ever think about feeling sorry for yourself or if you think about maybe like pulling out the victim card, or if you think about waving some sort of white flag of excuses, Diego will, his story will … He’ll make you think twice about doing any of those situations, because Diego is one of those guys where I’d be lying if I said I remember every little nitty gritty detail of his journey, but I do remember the broad strokes, and he’s a hustler and he’s out here getting things done.
Clay: So, I guess, like I said listeners can go back and watch, or listen to episode 150, but Diego, and I don’t know like, a few sentences why don’t you wrap up … Or, not wrap up, but why don’t you explain kind of your journey, how you got interested, and all the good stuff of your journey and then we’ll try to condense it, because like I said, they can go back to 150 if they want to.
Diego: All right, I’ll try to do a quick summary. So, at the beginning, I was investing through the TSP because of the military. They tell you when you go in use a portion of your paycheck to deposit into the TSP, and I did since 2008. Pretty much hitting the bottom without even knowing it. Throughout 2013, that’s when I got out. And then I got into a corporate America and then rolled that into a regular just 401K. My company 401K, and then, I want to say I left it alone for like three years until like 2016. Now just because I just got curious and I realized that, like one day my account lost … To me, which, I mean it was a significant amount, and [inaudible 00:07:58] actually when you’re looking at just the number it was a significant amount. But when you look at it in the percentage basis, it was really not that much.
Diego: But it was about around 600 to 650 dollars that I lost in just one day. And I didn’t even know why. I mean, like something happened, I just don’t know what happened during that time. And then I realized that I had a actual, on my 401K setup, they put me on a targeted year fund. Which was, I think it was 2040 or 2045. And so, from that point on I realized that I have no control over my money, at all. And I wanted to have control of my money, so I started to read about fundamentals, about what is a P/E ratio, what is a cash flow, all those fundamentals items that people use, you know, to determine whether the stock is valuable or not.
Diego: And, in all that reading, through just regular websites, Market Watch, Investors Daily, they came out these brokerage accounts doing the advertisement and then one of those caught my attention, we [inaudible 00:09:24] option house. They were offering, I mean they [inaudible 00:09:29] a lot back then, in the Market Watch website. I was like, “All right, I can throw in some money in there and then see what happens.” And so I threw in a few money, a little bit of money just to kind of get into the game, if you can call it like that.
Diego: And the first thing I did, it was to buy calls, what I didn’t even know what they were. I had no idea what calls were, and I didn’t even [inaudible 00:10:07] it. But I just bought calls on Chesapeake Energy because I used to work with … I mean I’m still working in the oil and gas industry. Back then, my company had a huge account with Chesapeake and they were drilling a lot. I mean, there was a lot of drilling going on for them and I thought, well, they’re drilling, I mean, they have money which means they’re growing. And that’s what I thought and then I put in a lot of cash in calls. And eventually I got lucky. I mean, I hit a not a home run, but maybe a double, or a triple.
Diego: And then I cashed it out, and I cashed it out way too early, because if I would have let it run a little longer, it could have been probably like maybe 1500 to 2000 more. And that’s when I decided that I had no idea what I was doing. Oh, by the way, I was doing it without even looking at a chart. It was just me taking a look, “Okay, like four dollars, this is like a good price, I can buy calls here at four bucks.” But, I was just blind. I mean I didn’t know exactly what I was doing, and-
Clay: Well there we go, I want to, let me interrupt you right there. You didn’t know what you were doing and we’ll come back. But, first off I really do appreciate your humility, I appreciate you being humble. But I asked for the good stuff of your story. And not that none of this stuff matters, because it does matter, but I’m just going to have to ask some pinpointed questions.
Clay: So, Diego, you are not from the United States, right?
Diego: I am not.
Clay: Where are you from?
Diego: I’m from Colombia.
Clay: Okay, Colombia. So, when you came to the United States you moved to Texas, right?
Diego: No, actually, I came to Massachusetts where my family lives.
Clay: I feel like I had no idea about that. Regardless, you came to the United States and you spoke very little English. Is that correct?
Diego: Yeah, that is right.
Clay: All right, and your first job ever was, was it a janitor of some sort, if I remember?
Diego: Yeah, I was a janitor.
Clay: And, if I remember right, didn’t you have some experiences where people kind of looked down at you and stuff like that, because you were somebody that didn’t speak English, and you’re a janitor. Is that all … Am I remembering this stuff right?
Diego: No, that is correct, because I was actually working in a college. And so I had all these kids, you know, privileged kids just doing teenager stuff. I guess it was not teenagers, because they were kind of like 18-19. But, you know, they were always like looking down on me because I was about the same age, and they were like … I don’t know if they were just curious or because someone of the same age was doing what I was doing. Or because they were just rich little kids, you know?
Clay: I don’t know either, all I know is that, like I said, listeners, before you start saying, “Oh, I have it so rough.” Here’s somebody that came here, didn’t speak English, had to just do what he had to do. I knew you worked at a school, but I don’t know if you had ever told me that your age. But yeah, that would be extra hard if you’re working as a janitor around people your own age and these kids are in school and all that sort of stuff. But you just did it … How long did you do that for?
Diego: About a year. Exactly one year.
Clay: And then you went and you joined the-
Diego: I joined the Marines.
Clay: Okay, I was going to say either Army or Marines. So you joined the Marines. And you joined the Marines why?
Diego: Because I wanted an education.
Clay: And you knew that by joining the Marines you would get the GI Bill, right?
Diego: That is right. Yep.
Clay: So, here’s Diego, and I’m going to try not to flip out, okay? So, listeners if you’re new to the show sometimes I flip out, but I’m going to try to not do it here. So, he comes to the country, doesn’t speak English. He just eats his humble pie, does janitor work among people his own age, and then says, “You know what? I want an education.” So instead of going down and loading himself up in debt, he goes and says, “You know what? I want a free education. But first, I need to join the Marines, the military.” So he goes and does that.
Clay: So the next time you think about anything holding … Oh, life is so hard. Well I don’t know, is it really that hard? Have you been through what Diego’s gone through? I don’t think so, but I still remember Diego was, I think it was Denver, yeah, Denver where you … You were talking to my wife, right? You met my wife in Denver, right? Yeah, because my wife was like, “Diego, wow.” I’m like, “I know, I told you Diego’s the man.” But that’s a whole nother side track.
Clay: So you join the Marines, you … Four years was it?
Diego: It was five years.
Clay: Five years, and you did some deployments in Afghanistan or Iraq, right?
Diego: Yeah, Afghanistan.
Clay: Okay, Afghanistan. So you come back and then you get the GI Bill, right? And you start to use that?
Diego: Yeah. That is right.
Clay: And you go and you decide, “You know what? I’m going to go and I’m going to get my Ph.D in the History of Pottery.” Is that what you decided to do?
Diego: No, no.
Clay: Okay, you went and you decided to get your degree in mechanical engineering, is that right?
Diego: Yeah, that is correct.
Clay: So, listeners out there, do you see what a plan actually looks like? Do you see what tossing excuses to the side looks like? Do you see what using victim cards as toilet paper looks like? Diego is a prime example of it. So, “Oh, college is so expensive.” It is? I don’t know, Diego finished out a way to get it for free. “Well, he had to join the Marines.” Yeah, that’s talking about finding a solution to the problem. So this whole, “Oh, it’s so expensive.” What are you talking about? The government will pay for it. Nobody’s proclaiming any of this is easy, but to sit here and play the victim card. I don’t know, I struggle with it because I know people like Diego and …
Clay: So anyways, you, and I’m trying to think. So, you’ve got to be, are you done with the mechanical engineering degree?
Diego: I wish. I’m close. I actually finish this year.
Clay: You finish this year?
Diego: I’ve got three classes left which is two electives and one capstone and that’s it.
Clay: Oh, the good old capstone. The capstone that’s the big old project, right?
Diego: Yeah.
Clay: Okay. I wonder if that’s universal, because I remember having to do the capstone project too. But that … You go to Texas A&M don’t you?
Diego: No, I’m going to University of Houston.
Clay: Okay, maybe I knew that. Regardless, though, all right. So that’s awesome that you’re almost done and I saw the picture you posted on-
Diego: The test?
Clay: Was that Facebook or was that Instagram? I don’t remember.
Diego: Yeah, that was on Facebook, yeah that was on Facebook.
Clay: And then I had the massive flashbacks. So, I mean for me, it looks like your teacher lets you have cheat sheets for the exams, but the image is like … What size font was that? Like eight? Six?
Diego: What do you mean?
Clay: On your cheat sheet that you needed the magnifying glass for. What size was that?
Diego: Actually, I don’t know, because those were a bunch of snapshots from the actual lecture notes. So all I did was to kind of minimize the pictures.
Clay: Oh, okay, I got you. See, I would have typed all that stuff up. But, Diego, you’re just one step ahead of my … I mean, I would have wasted so much time but what you did makes a whole lot more sense. Let’s just take snapshots and … But literally, it’s him and he’s got a magnifying glass right by it. But I remember those days totally, but I don’t think I was … I feel like the rules they always threw at me was it had to be hand written. But I think that kind of varied by teacher. But, regardless, I totally remember those days and you’re so close so just keep on going.
Clay: But … So, okay, you mention … Kind of hopping back in your story, that was the good stuff that I wanted to get at. But, you realized you didn’t know what you were doing and then pick it back up from there and we’ll start to talk about more of your present day stuff, so you realized you didn’t know what you were doing after buying those Chesapeake Bay calls. So, take it from there.
Diego: All right, so I bought those calls, and once again, no [inaudible 00:18:09] just me thinking, four dollars was good enough. And suddenly the stock spiked to seven dollars in just a matter of days. And like I said, to me it was like a nice double or triple and I just took profit for like less than a grand, but which it could have been about two grand. And that’s when I [inaudible 00:18:36] the point that I have no clue what I’m doing and I need actually … At that point I was like I need actually somebody that knows what to do and can also tell me what to do.
Diego: And then I signed up for the inner circle. Inner circle back then. Just to get an idea of where to enter and where to exit the stock. And so I just bought the inner circle and just got into the chat and I just read these people talking like … I mean, my primary language is Spanish, my secondary language is English. I think these people were just talking like Chinese to me. It was funny or talking in codes. Actually in the military we talk in code. So we talk about with the phonetic alphabet we do like whiskey tango or mike mike which is milometers, stuff like that. But this when I got into the chat and I was like, lunch pad, wolf candle … What else? A bunch of codes that-
Clay: Cliff points.
Diego: Cliff points.
Clay: Pools, yeah, VOL, yeah I know exactly what you mean, yeah.
Diego: Yeah, so I had no clue what those meant. I was like, “Okay.” And somebody mentioned in there that those are actually explained in the CTU courses. And back then, I was like, “All right, I can buy the course.” So I just bought one course, the CTU, then I bought the RT2. Then came out around my birthday month and I was like … It came out my birthday month and came out a email from Nate saying, like, because you bought these courses we can credit you some of those courses, or the value of those courses into the CTU package.
Diego: And I was like, “All right.” See, if I want to jump in this, I want to go all in, you know? So I just decided to, as a gift to me, to buy the entire CTU package. And I bought it around March 2016. I mean, I was in college by then, I’m still, I am. But back that, because it was still kind of like trying to take advantage of something that I knew before, all the pieces, calculus, chemistry. I could just kind of get by with me just doing both at the same time. So I decided to start CTU just the basic courses while I was in school.
Diego: And then I finished and I decided to take the entire summer of 2016 just to learn about CTU. I didn’t even take summer classes for my actual engineering degree. I just wanted to learn trading. And then, for the summer I decided to … Not to register in the school but take like a … The entire three months just at home watching the videos. So, I just watched the videos for the entire summer and then about maybe two, three months I did a little bit of paper trading. And then I went in and jumped into the market with just a clear idea of what I wanted to do. Just buy … Buy go long, on options. Just buying calls or buying puts.
Diego: And, I did that for quite some time, to be honest. It was very profitable but I realized that I was not very consistent. My PnL will go back and forth from positive to negative, positive to negative in a big range. I mean, back then it was a $2000 [inaudible 00:22:51] it was a small account, $2000. So [inaudible 00:22:54] was around 200 … 10% of the account was pretty much moving every day. Between green and red, green and red, red and green and back, and it was like that back and forth.
Diego: So I was not consistent. And, I was like trading like that for I want to say five months. And then I spend the other summer 2017 learning about advanced options. Because by then that was pretty much what I was hearing in the Podcast from [Chase 00:23:30] talking about with [Cobbs 00:23:32] or a bunch of other guys that they were pretty much [inaudible 00:23:35] being in the casino. So I was like, oh, I want to get into those probabilities. So I spent the other summer just learning about advanced options and by the end of the year I started doing a little bit. The end of the year, 2017, I started to sell nothing but call spreads, put spreads, and iron condors.
Diego: And just something that I knew back then that it was going to be a max profit and a maximum loss. Something … That actually is not right, I wanted to use a … Something that I knew exactly how much I was going to make, and exactly how much I was going to lose. And those three trade strategies were perfect for me. Because one it was, if I wanted to see the option or the market to go up, I just sell put options, or put spreads. If I wanted to see the market go down I just sell call spreads. And if nothing is going on I just sell the iron condor.
Diego: And I was trading like that for about four months, no maybe five months. Until I got to the meetup in Florida around, I think it was December, or it was January.
Clay: January, I think it was January, yep.
Diego: January. And I got to meet with Alex, with … I met Alex, Elk, a bunch of people, and actually probably the best person that actually, I mean, not to offend. One of the best person that I met there was Justin. He was a … He is still a big inspiration for me. I’m not sure if you know him, Clay, he’s actually one, he doesn’t trade he just investing, but based on technical analysis. So I met with him and as we were chatting he’s actually a deca millionaire. I don’t know probably right now, he probably broke the hundred million mark. Back then he was a deca millionaire. And then he explained to me about, you know, right now he’s living off his dividens, pretty much. And he said he has a map where … He has a map which is an actual dart board.
Diego: Which he and his wife just kind of throw a dart and where it lands that’s where they go for vacation. So, I was like, “Man, that’s a beautiful life, I would like to have some-”
Clay: And he does a lot of golf. I remember that part, too, he likes to golf so, yup.
Diego: Actually that’s how we started to connect because we … I play golf, and he play golf and then we’re like, yeah we play golf, and that’s where we started to get … I started to get curious and then started to ask him questions about how he got to that point. And he actually explained, he told me that you saved him because he was doing even worser than I was doing. And then you show him the path, and so he’s actually very grateful to you, as well. And so I met with him and I met with Alex, which, he gave me an idea and I used that idea. And it was great, and then it was awful.
Diego: Back then, you remember, 2017 early 2018 the market was going nowhere but up, and Alex was like “Why don’t you sell put spreads, and buy calls. And with the credit of the put spreads you get your calls for free.” I was like, “That’s actually a kind of nice idea.” And then, I mean it eventually worked, I mean it was working very good until the, well the [inaudible 00:27:47] crash. As you remember, in about February 2018, the [crosstalk 00:27:54] report and then everybody panicked because apparently inflation was too high. And everything went to hell from there. And that’s … I’m sorry, go ahead.
Clay: I was … I’m trying to think, had you already been on the podcast before Florida?
Diego: Yeah, I was, yeah.
Clay: Okay, cool. So we’re back into kind of where we’re picking up your journey from the last time you were ever on the podcast. So that’s good. I’m glad that we’re, we’ve made progress to the point of taking us all the way through your summary and now, in Florida, which would have been, like you said, your episode 150 appearance. And that’s the thing is there’s some great strategies out there but you’ve always got to remember, and you’ve always got to keep in mind, is the strategy working, because it’s just an awesome, awesome, awesome, flawless strategy?
Clay: Or is it working because, yeah, the market is just literally going straight up? Which, that’s good that you were taking advantage of it, but it sounds like you didn’t quite realize that maybe the only reason it was working was because the market was literally just going straight up. Or did you think that, were you aware of it? I mean, what was your impression of the strategy while you were doing it?
Diego: No, I was aware of it. I was aware of it because me and Alex, I mean, Alex was saying, “The market’s going nowhere but up. You can see every single day it’s pretty much green.” And actually look at the chart and you can see that almost every day from December to like January was just green. And I thought that, well, I mean, if I can actually sell the put spreads, I can use the credit to buy the calls and have those calls running for free and it was great. To the point, now actually, this is where it gets even funnier. Because I was waiting at the airport and I jumped into the chat and I read a message I think it was … Let me see, actually, I have the chat open right here. This actually was just now here, as well.
Diego: Carl was talking about selling [inaudible 00:30:07] options. And I remember he was talking too, I think it was probably RD2 trader, because they’re also both here in the chat. Carl was thinking about selling the SVXY, do you remember those?
Clay: I do, yeah, yup.
Diego: All right. So, I was telling about SVXY because they were kind of like this sure thing, like you sold those and 30 days later you just get the credit.
Clay: Real quick, for listeners sake, SVXY it’s an ETF and it’s based around volatility. So I’ll just leave it at that because I don’t want to scare anybody off, but SVXY, not a company or anything like that, but an ETF which stands for exchange traded fund. And this exact exchange traded fund, this ETF was based around volatility, so sorry to cut you off but that’s what Diego was talking about in regards to this particular ticker symbol.
Diego: All right, so actually, I need to put more context in there. There’s two, it’s a pair. SVXY, its volatility, it’s calm, and UVXY, if volatility is high. So back then UVXY, I mean, I’m sorry SVXY was around like 130, 135. Before the crash, I sold a bunch of … Well, not a bunch, it was just ten. Ten, it was ten call spreads, but $200 each. And so it was two grand, it was $2000 in call spreads. And my credit for those it was only 10%.
Diego: So I was willing to lose $1800 to make $200. And for those that don’t understand advanced options, you get more into why those thing works like that. Back then, I think it was, I mean I can’t remember very well, but I think my probability of the delta of those calls was like 20. I mean, it was like when you look at it like that it is like out of 10 times, two times your calls are going to get call. Or are going to get assigned. And I was … Yeah, like I said probability back then, it was 80% out of the money. And so I sold those call spreads and actually I’m sorry it was put spreads. Yeah, I sold put spreads on SVXY because I wanted to go up or to stay up.
Diego: And so I had those and I had a bunch of calls, as well, in everything, mostly tech stocks. And I think I remember sending an email to you saying that it was, one day I broke a hundred … A thousand dollars. That was like the maximum gain that I had for just one day. I think I remember you telling me to be careful and to not get too confident. And then, even with that warning I went straight ahead and I kept doing what I was doing. And eventually came that Friday and the market’s all off after the jobs report. And then I sold more and sold even more on the next Monday. And those SVXY, it went from like 130 to like $12 in just a matter of … I mean, probably minutes. Because it was actually all after hours.
Clay: Yeah, and to offer a little more context. I mean, I haven’t been around as some of the guests, but I’ve been around over a decade now and what Diego is referring to is not an exaggeration, it’s not him adding drama to the story. It was, I don’t know if I’ll call it the most crazy, but it’s got to be like top five for sure, maybe even top three craziest things I’ve ever seen. From literally up well over 100 and just dumped and dumped and dumped. It was wild, so like I said he’s not exaggerating when he’s saying these things went from well up over 100 to a whole lot lower, and like you said, Diego, this was all in after hours too which just made things that much more nasty.
Clay: But it was crazy.
Diego: Yeah, I’m actually looking at the chart right here. It happened … Actually that’s probably in the … I don’t know if they did a reversed-
Clay: Yeah, I’m guessing they probably have redone the share structure now, so it’s probably throwing some things off.
Diego: It goes from like 550 to 50. So [crosstalk 00:35:24] that’s about 100 so yeah.
Clay: So, yeah, for listeners out there, because they’ve done reverse splits which means they’ve manipulated the share structure a little bit. But point being, what Diego is referring to now and just the prices you would see if you would go and look. Think about that, $550 down to $50 in a matter of, not like weeks or months or anything like that. But 550 to 50 in a very very very small amount of time. So it sounds like this was not a good experience for you then.
Diego: It was not. And actually, back before that, actually I was, I made 100% off my initial investment and then a little more, I was … It went from 2,000 to like 4,500 and so I was … I mean, like 100% profit and I was just pretty much playing with the house money if you want to call it like that.
Diego: And [inaudible 00:36:28] that just one week it went from like 45 to like a grand. I mean, it was very quickly that I lost everything. Well not everything but at least a big portion of it. And part of it because I was very, what’s the word, I mean I didn’t want to believe it to be honest. I mean, there was all this-
Clay: Yeah, you’re in kind of shock, you’re in denial.
Diego: I was in denial. I was very stubborn not to listen to the actual chart. You know, the chart was telling the … This was broken, I mean the trends, all the trends are broken and … But the people on the TVs, it was like [inaudible 00:37:15] this is just volatility crash, people have to, people have to short because they sold so many volatility options or this many volatility positions that they need to cover the margins and all that crap. But in reality the chart was broken, I mean there was nothing else. It was a bunch of technical failure, and I did not want to admit it, so I just kept holding it and holding it and holding it until eventually … For those that are not actually in, or probably have not read … Have not had the opportunity to read a book from Mark … I forget his name.
Diego: Anyway, it’s called … I even forgot the name of the book, that is embarrassing.
Clay: No worries. Mark, I feel like I might know what you’re talking about but I’m not quite sure [crosstalk 00:38:11] I don’t know for sure.
Diego: It is, actually, Trading in the Zone by Mark Douglas.
Clay: Oh, Douglas, yes, yes, okay. Yup.
Diego: So he’s talking about physical pain, and actually [inaudible 00:38:26] physical and mental pain and I think during that one week I had both. I mean, I’ve been through some actual physical pain, when you can say, “I can’t take it anymore.” But eventually the mind beats the body and you get through it. But with this, I mean, like I said, it was not a lot of money. We’re talking, when you look at other people in the chat that lost more money than just three K, $3000 is not a lot.
Diego: But, I was feeling actual pain. I don’t know if it was mental pain or physical pain, but when I started to feel like that, that’s when I say, “No more.” And I’m shutting down, I closed all my positions. Actually before that happened, Clay, let me tell you that I got a hell of a scare probably twice. I got two scares, and like I say not a big deal, back then, but I kind of learned from it.
Diego: The first one was, I thought because I sold those put spreads off and SVXY around 130 and they were worth $12 that I had to cover that entire spread. So that was like closed to $10,000 per option. Am I right? It was about, let’s say 120. And was worth-
Clay: Yeah, that sounds about yep-
Diego: Yeah, about $100 times 100. Yeah, $10,000 per option. So I thought that I had to cover all that money. I was like what the hell am I going to get 100K? I mean, I’m done here, I mean my entire financial life is gone. And I mean, I’m glad that it was actually took me awhile to realize what the actual say [inaudible 00:40:32] there is a floor and a ceiling. The floor on my … On the spreads was just the worth of the call that I sold against those puts. So I was able just to cover for max loss which came out to be $1800.
Clay: Much better than tens of thousands of dollars, though.
Diego: Yeah, absolutely, I remember-
Clay: How long did you think that you were going to have to owe tens of thousands of dollars? Was this like a few hours or is this like a couple days?
Diego: I’m sorry actually that night when it crashed, I literally, I was trying to sleep but I was thinking about it and I started to like … I was sweating, sweating like a cold sweat. You know, I started to feel like that and that was me sleeping next to my wife. Like what am I going to say to her, like I just broke us. I was [inaudible 00:41:32]-
Clay: I was going to say that sounds like a very very miserable experience to think that you literally just like destroyed your financials. So I would say that, well I’m glad that was just a misunderstanding on your part, because that … Oh, man. So did you figure it out the next day that you had a wrong understanding?
Diego: Yeah, actually I was able to speak with Carl and then he … Through the chat and he told me, well, you’ve got to … You had a call against those puts so technically you had a … What’s, I forgot … You had a stop loss in a sense.
Clay: Right, yeah. It’s minimize … It’s not allowing it to expand to what you thought it was. Stop loss is a way to look at it, yeah.
Diego: So, yeah, he explained it I was like, okay I feel relief now. So actually I left those hanging until probably the press could recover a little bit. But it was just me just trying to remain hopeful, I guess. And sold also a little bit on the Qs and those got actually assigned. And the same thing that happened again. But it was probably like a week after the first scare it happened again with the Qs. But I was actually got assigned on those and I think it was just 100 shares short of QQQs. And that was worth, I think the national value it was in the hundred and 30s, thousand.
Diego: And so I got the notification then the very next day as soon as I woke up. I kind of get ready, do a little bit of push ups and then I took a look at my cell phone, looked for work emails and then I look at this email in my personal email from my broker, he was back then [inaudible 00:43:33] that I got an assignment from this options QQQs and I started to panic. It wasn’t even open, the market wasn’t even open. But then I had that 100 shares short on the QQQs in my account. And I think it was a margin call, as well, because I think they put you in a margin call right away.
Diego: And I was like, okay, where the hell am I going to get all this cash to cover this margin call. And then I call, once again I was panicking, and then I turn to, on my way to work I was trying to read, understand what could I do. And then eventually, I think it’s one of the episodes on [inaudible 00:44:20] about doing like a little … I think it’s called a stock option. It’s when you sell the stock and you sell the option. And pretty much you sell at your max loss, which was $100.
Diego: And so I called actually because I wasn’t able to get a bid on that strategy, I had to call the broker. I had to call the trade desk to tell them to get me out of it. And eventually they did, my max loss was $100. They were able to get me out for like $120. But, so those two right there got me like, I can not play with this scene anymore until I actually, I’ll be able to understand the risk and the effect that it produces on me.
Clay: Yeah, I would definitely say that those are some scary situations when, I mean what stood out to me, though the most was especially with … When you said, the people on the TV were saying one thing but then looking at the chart I knew that the trends were broken, and the chart was just broken. And yet you still didn’t quite listen to it then. So it’s amazing how it wasn’t your chart vision, it wasn’t your understanding of what you were looking at as far as the data that the chart was giving you, but it was just those voices in your head.
Clay: And it sounds like the voices on TV were influencing you a little bit, too. And not that you’re … This is a very common thing. Everybody’s done it as traders assuming that they’re being honest. But yet, you know what to do but somehow there’s some other voice whether that be from a website or a blog or social media or the TV where people are saying one thing and then all of a sudden you’re justifying it and things get a lot worse.
Clay: Well I’m glad that neither of those situations have you living in a cardboard box or anything like that. So what did you do, though, from that point? I mean, did you, I guess I’ll just pick it back up there because we are totally in uncharted territory in terms of your journey is concerned. So where’d you go after those two scares?
Diego: Well, after that, like I said, I pretty much sold everything that I had or bought or cover everything that I had and put a reset on my fundamentals. By fundamentals I’m meaning my trading policy that I had. I remember, well for those that will listen or could be listening to my first podcast, I had a policy that is kind of like me saying, “You’re only going to be able to do, or trade in these situations.” So I realized that I have a bunch of gaps there and actually I did not have a maximum amount, actually I probably did have a maximum amount for trade but it was not based on my account balance, but it was just based on an actual over all trade cost.
Diego: I explain better, if my account was $5000 my max was 250. But in reality if they say they should only be able to put in five percent of your account on any position and it was actually, yeah it was 250. But I was not keeping it like that, it was just me sometimes I put a position of 250 sometimes I go $400 so in this case with the SVXY I went with almost $2000 in an account of 5000. That’s almost 40% of the account. Or actually, it is 40% of the account.
Diego: So, like I said, put a break, I mean I knew my technicals were fine, I realize that, because I mean my chart was not too blotted, it’s just a few SMAs and that’s it. Don’t have any technical educators so it was just me knowing that the chart vision was still good. I just had to probably realize that everything that is on a trend could be broken and that my entries were just based on the trend it was not based on any actual patterns. So from that point I realized that I was going to make a five, kind of like a five question strategy or five question survey before-
Clay: Checklist.
Diego: Exactly, thank you, checklist, before I get into a position which I still apply today. So the first question is, is there a trend? So I ask is is upward? Which means the two hundred is already … No I’m sorry the 10 is already 50 and the 50 [inaudible 00:49:25] the 200. Or if it is a downward trend, which is the opposite. And the next question, number two is, is it a pattern? So I’m only able to trade on, let me see, seven patterns. [inaudible 00:49:40] the [inaudible 00:49:41] triangles, the widgets and the Fibonacci’s on key levels of Fibonacci’s.
Diego: And the next question, number three, what is the IV percentile? Because that actually kill me when the market made that rally after that big drop. I have a bunch of calls and the price went really high, I mean when you look at the [inaudible 00:50:07] recover like five dollars in just a day but I did not make any progress because the IV crush, I mean the IV crush maintained the price of the option way too low.
Diego: So that’s when I decided I need to actually start paying more attention to the IV percentile. So that’s what my question number three.
Diego: My question number four is what is the spread? Is it less than 10 cents or more than 10 cents? And this happened because I sold back, in 2017, I sold a put spread on … No, I think a call spread on CMG, Chipotle. And you should realize Chipotle today is a huge spread. And, so I make the move but because of the spread if I was going to sell right away I was not able going to make any profit. I mean when you look at the what the broker tells you on your PnL, it’s actually at mid-price. It’s not the price that if you going to get in right away. It’s not the bid or the ask.
Diego: So when you look at the mid-price, I mean when you look at your PnL it can be green, but in reality you’re in the red, because when you want to get out you have to sell the, I forgot what the … The [natural 00:51:29] price, which is not always the best price. And for because of that I realized that I need to put a parameter on what’s going to be an acceptable spread for me. So, like if I have 10 cent spreads it is close to 10 dollars if I’m in the hole already. So I’m okay with that.
Diego: And the last question is, where is my next logical stop? If it’s going to be based on the chart, I need support and assistance, or it’s going to be based on two percent, and I’m sorry the maximum of two percent on my account value. So, whatever is less that’s the one I am taking.
Diego: So that’s my checklist. So I do that and from that point forward I started to trade-
Clay: Let me ask this. When did the checklist go into play? Time wise.
Diego: That was about March, April 2018.
Clay: Okay, so we are, so this checklist has been into play because for listeners sake, as of the recording of this, it is July 1st of 2019. So this five question checklist has been into play for well over a year now. And this is what you’re still using to this present time?
Diego: I do, yeah. I still do.
Clay: And is it … Well, I’m assuming it’s been working for you then and it’s been keeping you accountable if you’re still doing it after over a year?
Diego: Yeah, yeah, I actually … I’ll tell you something about what happened today. But before that I need to get to another actual key point.
Clay: Cool.
Diego: All right, so like I said I was using it since like March, April 2018 and was starting to kind of build my account again from that … Physical and psychological loss if you want to call it that way, as well. Because to me it was actually a big psychological impact because like I said I knew that technically I was fine, but it was more into, like I was very undisciplined. Like I knew that I got pretty much what I deserved.
Diego: One, because actually it was me getting the, which is fine, I mean, getting the advice from Alex to sell put spreads and buy calls and get more [inaudible 00:53:54] into positioning.
Diego: When I’m actually looking at the chart, and once again from [inaudible 00:54:03] I mean I wasn’t even part of the conversation but I just read the conversation between Alex, Carl and another person about the SVXY and how fine and how secure they were. So like I said, I just jumped into those without actually doing my research. And I was trying to [inaudible 00:54:21] or something that it was working for them, without me testing it. And so I got what I deserved, my account lost about 70% of the value. And then I started to put these rules or checklist in place and it started to go back up.
Diego: And I did and it was just me trading on the daily chart, and that was getting very confident in me and my trading and then I realized that because of the checklist I was limited to maybe four or five positions. And that said, I was like trading very very small on the sense of quantity of positions. But it was growing, I mean my account was growing very slowly, but it was growing. And eventually I started to feel kind of over confident. And you see what you want to see pretty much, and this is what happened to me, I started to, “Oh, this looks like an actual [inaudible 00:55:29]” but it was a [inaudible 00:55:29] but the trend, the short term trade, the short term trend it was broken. But it was a [inaudible 00:55:40] so okay it’s a [inaudible 00:55:41] it qualifies, let’s put them on.
Diego: And so I was kind of like, had the checklist but I wanted to see what I needed to see in order to get into a trade. So I started to have those kind of like, what’s it called when you go into rehab and you go back into the addiction again?
Clay: Well, I thought you were going to say something about … A relapse.
Diego: Exactly. I had a relapse on … Because remember back then I told you that I was having a problem of over trading and I had a relapse on over trading because I was just trading maybe three, five positions at one time. And I thought it was too small or too many or too few positions I needed more. So I relapsed into over trading just by seeing what I wanted to see in the chart. So it could fit my checklist. And eventually I got smoked again, back when probably around September, October. And I realized that maybe the problem here is that I was not able to keep up.
Diego: I mean, I knew, there were some problems back there. One I knew that I was over trading, and two, because of the over trading I was not able to keep up with the tracker with the time frame that I was doing. Which was a daily chart. And me trying to keep up with trading, my day job, which, actually I got a promotion back then, and I got more responsibility which means that I was able to be less time at work looking at the computer. Or looking actually my trading account. So I lost the screen time, if you will.
Diego: And so me trying to keep up with work, trying to keep up with school, and trying to keep up with my family, and trying to keep up with trading, there were times where actually I was supposed to be looking at the chart every single day. There are times where actually I was looking at it probably once a week. And, like I said, some of them hit the stops which was fine. That’s why I had to stop to be able to kind of trade like that. But I realized that I was very undisciplined, me trading on the time frame that I was not able to, I was not going to be able to keep up.
Diego: So I made a transition into a weekly chart. And that’s actually what I’m … When I was telling you that I needed to get to that point first before I was discussing what happened today. So I position, I have five position, and today was actually a weird day in the market. Because it [inaudible 00:58:44] up and it faded. And, I mean my PnL for today, it went to like 250 to like negative 50, and I was like, “Oh, that sucks.” But it’s all right because in reality my options don’t expire until September, October. So as long as-
Clay: So they’re a ways out then.
Diego: Yeah, so as long as I don’t lose, or as long as I keep gaining on interest and value, and the time is … I mean eventually I have to make a certain amount of money to break even. But as long as keep gaining intrinsic value and the trend is still going my way I’m holding it because my time frame is no longer the daily chart, but it’s a weekly chart. And that’s what I’m actually doing right now, like I said, I’m following the checklist but on a weekly chart basis, and I’m trying to once again few positions and just trying to keep up.
Clay: Now how are you doing keeping up? Because you made the comment how you wanted to be checking the chart like daily, and then all of a sudden you were doing it like maybe once per week, which is kind of a big jump there. So to just help you hold you accountable here you’re trying to keep up. So how are you doing keeping up?
Diego: Well actually I’m looking at it just every Thursday night, to looking to see if there’s anything that it is forming on my form by the end of close of Friday. Or looking at it at Sunday night which is the pattern or the candle is formed and that there’s something that can jump in on Monday. So I’m just looking at it twice a week, Thursdays and Sundays.
Clay: So it sounds like you have it as more so a routine right now, where it’s just part of your daily life.
Diego: Yeah, pretty much. Actually, I told my wife like, this is going to be personal time for me, at least an hour and a half each of those days.
Clay: Which is good because that is definitely a way to ensure that it doesn’t get, I guess lost in life, if you will, because there’s just a bunch of other things going on. For me, it’s always, I mean my wife and even my kids know now [inaudible 01:01:06] right now, Tuesday nights is webinar night. So husband daddy will not be around at 7:00 Eastern Time because he’s got a webinar and it’s been like this for, I don’t know, four years now, something like that.
Clay: But it’s a great way to just make sure things get done and that you don’t lose track of it. Because if I, I mean if I didn’t have a set time for a webinar, I mean I could easily see being like, “Oh, I totally forgot about it. Well, next week.” And then all of a sudden something else happens, but … So I’m a big fan that you’ve communicated that to your wife and she’s like, “Okay, yeah, Thursdays and Sundays my hot little hubby Diego has got to go spend some time looking at charts.” Does she call you your hot little hubby? Is that what she refers to you as?
Diego: No, actually not really, we got no nicknames actually. We’re pretty lame in that [inaudible 01:01:58].
Clay: Well, if she listens to this, Diego’s wife I propose that you call Diego, “My hot little hubby” from now on. I’m just throwing it out there, Diego’s wife.
Clay: So, it sounds like, for listeners sake. Weekly chart, but then he mentioned today, so as of today the recording, yeah, it was kind of a goofy day with the market, so I can see how one day would kind of throw you off. But it sounds like you have full ownership, you have full kind of realization that, “Hey, I’m using the weekly chart so one day is not a big difference.” Because from a charting perspective, five days will make up one candle on the weekly chart. So that’s something that sounds like you’ve really come to realize that, yeah there’s no need to freak out, still got plenty of time, and you just got to actually let time do it’s thing.
Clay: And, I mean, has your account been growing over time, I mean especially since you switched to the weekly chart? Are you noticing finally some stabilization within that regard?
Diego: Yeah, it has, it’s actually since … I’m also actually change my, because probably I was very stringent on my RVR. So, I wanted to make sure that I was able to locate some profits and I only changed from one to three to one to two. And because of that like I said, I get it’s small game but it’s two times what I’m risking. But if I can do that consistently it will always always add up. Because one problem that I had back then was also trying to see those reversals on my PnL.
Diego: Like today when you went from green to red and, [inaudible 01:03:44] worthless. Or my [inaudible 01:03:46] got it.
Diego: So, eventually I mean the account has been growing very slowly, but like I said, I’m impatient I know that it is not … I’m not in a race. Right now I’m trying to focus on finishing my degree, which will be this December, I’ll be able to get my freedom back, if you want to call it that way. Because sometimes I feel like I’m studying and I’m not the owner of my own time because I have time to … I need time to study for a subject that I really don’t care that much.
Diego: I mean don’t take it the wrong way but right now I’m taking electives and right now, I’m working in the online gas, and I’m taking electives like in regards to dynamics and control. Which has nothing to do with my industry. But I have to take it because I need those credits because it’s part of my degree requirement.
Diego: So, going back to the subject I know that I need to take care of other priorities first before I jump into my trading and hopefully I will be able to switch back to a daily chart once I get my time back. And eventually once I start beating or getting used to the psychological gaps that I have to be able to fully emerge into this world. Because, I mean, I like it and then I told my wife like, I mean I told my wife everything. Like the day that I lost almost $3500 in one day. I told her that I lost this much, but it is not a failure. It would be a failure once I decided to stop completely.
Diego: And decided to … The day I decide to give the money, or pay somebody else to manage the money for me. That’s the day I declare this a failure. Until then, I [inaudible 01:05:48] be able to keep grinding and keep learning. Because that is a good thing about this, this world there is so much to learn and I mean, you got, I had probably, my library is filled probably with 20 books of just between the stock trading, technical analysis, stop options, or just one, actually I have just one book that is dedicated to just one indicator which is the Fibonacci retracements. And, so like I said, there is a lot to learn.
Diego: And I know it’s not a sprint, it’s a marathon, and eventually this is something that I would like to do on my the future and actual, [inaudible 01:06:36] actually when I went to transition for doing [inaudible 01:06:39] to actual having my own investment account.
Clay: Awesome. No, that’s, you have come a long way and you’re still chugging along. And I agree, though, because you work full time, you’re getting … It’s not like you’re getting some sort of, I don’t know, Dutch flower growing degree. I mean, you’re getting an engineering degree, while working full time. So you’re a super busy guy, and if anybody can say like, “Yeah, I don’t have as much time as I would like.” That would be you. But I also like how you’re not like playing the victim card, you’re just adjusting the strategy using the weekly chart and that’s the way you got to do it sometimes.
Clay: You got to just take with the situation and form it to work for you. And it sounds like, well I don’t know why we took a year and a half to get you back. So you have to come back, let’s see this is episode like 230 something I think. But yeah, you’ll have to come back way before a year and a half. Because-
Diego: Well, yeah probably because I had disappeared from the community since like I told you I got that promotion. I mean I used to be in the community very involved back then when I was able to kind of … I remember sending those pictures of me and my mothers and I had that mirror in my mother to watch my back. But because of the promotion I’m not able to keep up with the chat or be able to be connected on the phone or the computer.
Diego: And I kind of disappeared from the community. I was actually, back then I was able to read the … Kind of do like a quick recap of every day of what happened in the chat. From 8:30 until close, so I was reading through it. Because there was always some piece of information in there that you find worth it. And I was able to do that. But right now I don’t, like I said, don’t have the time, and I disappear from the community. And right now, I also disappear from the webinars and that’s because I have classes for the past three semesters that are going on Tuesdays and Thursdays from four to six. And 6:00 is when I’m trying to commute back home and that’s when is the webinar time.
Diego: But eventually, Clay, I would like to stick around and like I say once I get my time back I will be able to be more part of the community.
Clay: Well, I mean, it’s hard, in a greedy sense, yeah because you’re an asset to the community it’s nice to have you around. But in a practical setting I mean, yeah, taking a … Getting a raise and a promotion at work. I mean you got to go with the winning trade and the winning trade is, if the promotion at work means maybe a little less time in the chat room. Well that … From a selfish stand point, yeah, that’s no good. But from where you stand I’d say totally understandable. But like you said, December you’ll have your degree and your time will get freed up. So it’ll be interesting to continue to follow you with all this.
Clay: But yeah, all I’ll say is it sounds like just keep doing what you’re doing, follow the chart, follow the checklist, follow the questions and it’ll be a slow steady burn, but sometimes that’s the best way to go about it. The big old gains can quickly disappear just as fast as I know you are well aware of. But, Diego, we’re looking at … I can’t believe we’re an hour already, actually over an hour right now. Time flies. But Diego, thank you very much for hanging out and you’ll have to come back here. Like I said, we’re not going to wait a year and a half, but we’ll definitely have you get back. But thank you again.
Diego: No, thank you, Clay, for having me again.
Clay: All right, awesome. Before you go as a listener, a final few things, first off if you’re listening to this at the website make sure to check out the … Let’s see I’m trying to think, it’ll be in the bottom right hand portion, there’s a chat box there that will connect you with myself or anther team member. And if you have questions, comments, suggestions, please leave those there, we will interact. It starts off as like a little bot, but if you want to talk to a human just tell it you want to talk to a human and it’ll do that.
Clay: And then if you’re listening on iTunes or any of the other podcast players please subscribe and especially on iTunes if you could leave us a rating, that really really goes a long way and helps us out and I really appreciate that. Like I said, even if you’ve never spend a dime on the site, that’s totally okay, but like I said, if you want to help out, if you enjoy these and are finding them beneficial, a very quick way to just kind of contribute in a non-monetary way would just be to click that like button or leave us a rating, ideally if you could type us up a comment too that really helps out.
Clay: But either way thank you as listeners I appreciate your dedication I appreciate you tuning in every week thank you again to Diego and I will see you all back next week.
Announcer: This has been the Stock Trading Reality Podcast. Thanks for taking the time to hang out. To learn more about Clay and the Clay Trader community including the trading team, premium training and more, visit claytrader.com.