Transcript

Clay: Hey, it’s Clay. Real quick before we get to the episode, I want to bring your attention to a desk that I recently got for the cottage that I have. Autonomous is the company, and they sent me a desk to do a review on, and I wanted to just share it with you because, spoiler alert, I was very, very pleased with the desk.
Clay: However, I will say that the review that I did, I don’t know if I was the only one to do it, but I put a little spin on it, where I open it up and you see me unbox the entire thing. This was not some sort of review where I had it all scripted out and I knew what I was going to say, or that the company sent me anything. It could’ve been a review that did not turn out very well for the company. They were aware of it, and they said, “That’s fine. I just want you to give your honest thoughts.” And that’s what I did. And like I said, I enjoy it very, very much so. It’s awesome, and you can see how it all played out.
Clay: If you’re interested, if you’re in the market for maybe a new desk, and the nice thing about this desk is it’s one of those that becomes a standing desk or a sitting desk, and I love standing desks. They’ve really helped out my back. I don’t know about you, but if you’re in a situation where you sit around quite a bit, which yes, us Traders, we do sit. But for me, my back was aching and I was sore and I couldn’t quite figure it out. But then years ago, I changed to a standing desk.
Clay: And while I’m not going to say that it was strictly the standing desk that made all the difference, there is no doubt in my mind that standing did make a very big difference. In fact, there’s all sorts of scientific research out there that shows that standing up can be very beneficial for you, because the whole sitting down position, especially for extended periods of time, really isn’t that healthy for you. It is a standing desk, but it’s all automated, so you can press buttons and it rises and falls back to whatever height you want it.
Clay: Definitely check it out if you go to claytrader.com/desk. Again, claytrader.com/desk. That’s where you can find the review video. There’s also a link there where if you click on it, you’ll get a special deal. Thanks to Autonomous for doing that. And like I said, it was totally a non-scripted review, so if you want, just straight-up real thoughts as you see me unbox the entire thing. Claytrader.com/desk. All right, let’s get to the episode. This is The Stock Trading Reality Podcast, episode 297.
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. Did you know porcupines could climb trees? He didn’t. ClayTrader.
Clay: Be honest with yourself. Did you really know that? Honestly, did you really know that porcupines could climb trees? I had no idea. Maybe it’s one of these things I should’ve known. Did I not pay attention at a very important part of school where I should’ve known that? It’s not like birds can fly, right? If I was sitting here saying, “Did you know birds can fly?”, you would, very justifiably so, be able to say, “Clay, did you not pay attention in life or in school? You’re just now discovering that birds can fly?” But porcupines climbing trees? I had no idea.
Clay: But anyways, I was looking a potential piece of land, really nice piece of land, walking down a path, and look over and there’s a porcupine crossing the pathway, and then up the tree it goes, and we just sat there and watched it. It was really cool, but I just had no idea at all that a porcupine could climb a tree. I really hope this is not a situation where it’s like, “Hey, Clay, did you know that dolphins can swim? Did you know that, Clay? Did you know that tigers have teeth, Clay?” I hope it’s not one of these situations. If it is, then I guess I look like a moron right now. But I feel like it’s one of those things where maybe not a lot of people knew that porcupines could climb trees. I just thought they hung out in the weeds and taller shrubbery and grass. But that is what I recently learned with an outdoor adventure, and I thought I’d pass it along to you, just in case you weren’t aware that yes, porcupines can climb trees.
Clay: As for our episode, very, very excited about it. It’s already happened. I always do these intros after the recording has been done with the guest. And shame on me, and I get into it a little bit, but this person had been on the podcast before, but they’re pretty much a solo wolf. They go do their own thing, so it’s not like they’re hanging around in the chatroom all the time. And everybody’s got different styles, but a longtime member of the community. Last time I talked with him, he was 19. Now, he is 21. He is over in Denmark, which I suppose you knew that already by the title of this. But fantastic, fantastic discussion.
Clay: A little note, there might be… I’m assuming it’ll show up and you’ll hear it, but at one point, he was using a certain mic and then the batteries died, and then he had to switch to another mic. If you do hear a change in his voice or just the quality of what you’re hearing, you’re not going crazy. We just had to do an intra-discussion mic-change, so just a heads-up on that. But without further ado, let’s just get to our guest. And yeah, there’s some great stuff coming your way, so let’s get to it. Iman, welcome back to the show!
Nariman: Thank you, Clay. Thank you very much. I happy to be back.
Clay: Now, I was just telling Iman this before we got recording, but I’m impressed with myself. I’m impressed with my memory. But I saw his name, and I thought, “That looks familiar, but I don’t know if it’s that person,” or whatever. And for a little background, behind the scenes, before I get recording, I just go through the typical, “Hey…” I get the guests prepped a little bit, just to make sure. And then Iman said, “I’ve been on the show before.” And I was like, “Wait a second. Are you the person that was… You did some military stuff?” And he was like, “Yeah, in Denmark.” I was like, “Okay, I totally know who you are then,” and that’s who I thought. But how I remembered that you were in the military. Full disclosure, I’m not that good. I didn’t remember that it was Denmark. I knew it was one of the Scandinavian countries.
Clay: Iman has been on the show before, and he’s back, and I have no idea what we’re going to be talking about because… And this is the way I prefer it. I just want this to be as genuine as possible. First off, Iman, thank you for volunteering to come back. We sent out an email just asking people, “Hey, if you want the show to go on, we need your help.” And you answered the call of duty. First off, thank you very much.
Nariman: Sure. It’s a pleasure. I should thank you, giving people a voice, who are starting out investing and trading. It can feel very lonely in this world. I appreciate all the outreach.
Clay: And I appreciate… It’s a give-and-take type thing. My first question to you, though, is, are you still in Denmark? Are you still in the military? Where do you stand in just life in general, before we start to go down more so the trading rabbit hole?
Nariman: Sure. When I was in the military, I actually wanted to continue. However, there’s a funny-ish story. It’s actually quite unfortunate. I applied for a second test in the [AFOS 00:07:21]. However, the drill sergeant gave me his handshake and told me, “See you on Thursday.” And I was like, “Sure, see you on Thursday.” Next week. And then I went to the doctor and psychologist, and they told me that it was Wednesday. This was a very little mess-up, which actually led me to go to high school after the military. Now, I’ve dropped the idea of going into the military, because the subjects in school are very interesting, and have to do with what I’d like to work with in the future.
Clay: That’s awesome. You are still in Denmark, then.
Nariman: Yes, I am indeed.
Clay: Now, did you say high school?
Nariman: Yes. [crosstalk 00:08:23].
Clay: Is that like college for us Americans, or do you call that different?
Nariman: Mm-hmm (affirmative).
Clay: Okay. Let me ask you, how old are you at this point?
Nariman: I am 21. I am done with it in half a year.
Clay: Okay, awesome. The last time we talked, do you remember how long ago that was? Couple years ago, probably.
Nariman: Yeah, indeed. It was, I think, two months after the 2018 market meltdown in my first year of high school.
Clay: Okay. It’s been a while. This is good stuff. You are now a couple years older, you got a couple more years’ wisdom with you. Let me know exactly. I’m trying to remember the exact details, but I’m drawing a blank. Hopefully you’re not offended, given I’ve talked with many people over the years.
Nariman: Not at all.
Clay: Where were you the last time we left off? Give us a summary of your journey in the market at that first point, and just bring us up to the best of your ability. As far as your memory’s concerned, that’s a couple years ago when we last talked. Just give people, to the best of your ability, a summary of where you were at the last time we spoke with each other.
Nariman: Yeah. I just finished the options course, and I was systematizing all the education that I got and the principles that I got from your courses. When you take the course, you take the notes, and then you take the notes, and then you organize them, and then you take the organized notes and you systematize them. And then hopefully, you have a business, and you are not the business. Then you can sell. But that’s what I talk about the future.
Nariman: But it was about options, and I was finished with that, and I already had taken the technical analysis. Trampoline trading, RvR trading, volcano trading. All these trading stock principles I took with me, with the options principles. Right now, I’m trying to work it in with the curriculum of my subjects in school, both now and in the future.
Clay: What are you taking in school right now? What topics, what subjects? You made a comment earlier about how you’re really enjoying the different classes and such that you’re going through. What does that look like from your schooling perspective? What kind of classes?
Nariman: Yes. I am quite lucky that I’m going to a gymnasium, which is right before a university bachelor. I take the business line. I learn about microeconomics, business, innovation, history, culture, and organization. The principle from these subjects are very crucial for investing. Maybe history and culture is weird, but if you look at what happened with the COVID-19, all the hedge funds went out there and got history consultants to figure out what happened with the markets in the 1918 Spanish flu. As well as culture. Look at the Asian markets, China and India, those markets have their own idiosyncrasies and nuances, which one can… Maybe exploit is a bad word, but one can take advantage of and [inaudible 00:12:16].
Clay: No, you’re absolutely right. That’s a good point. I actually did not know that the hedge funds were bringing in a bunch of history people, but that’s actually a little interesting fun fact there. But it makes good sense why they would. Hey, what happened last time? What was going on? Hedge funds are all about that data. You said that you have a half a year left. Is that what you said in terms of all these classes, and then you’re totally done?
Nariman: Fortunately, yes. Half a year, fortunately.
Clay: Okay. All right. Awesome. What are you doing? Are you still trading right now? What is your status of things? As you updated us, last time, you were looking at options and you were going through the classes and taking notes upon notes, and then organizing the notes and all of that. Where did that go from there? You had gone through the options, you had taken all those notes, and then did you start to get more involved in the markets with options trading? Fill in those holes after you had gone through the note-taking extravaganza, it sounds like.
Nariman: Sure. After paper trading earning calls, which were more of an ad hoc routine, I started to look on how I can make a solid process of what you would call selling options and wanting them to decay, wanting their value to decay. And you do that purely on the assumption that the price movement, the volatility, is overstated, which it typically is if you look at the historical volatility versus implied volatility. And I made a system like that, and I paper traded it, and it went fine. It was above 70%, which is what it should be according to the numbers. It’s a 70% success rate because of the overstated price moves. And I started to look more at the big picture, because corona happened.
Clay: Let me you ask you this real quick, because I know it’s a common question. It’s a good question that listeners may be having.
Nariman: Yes.
Clay: Especially given that you are in Denmark, what broker or what platform were you using to do your paper trading, your simulated trading, your demo trading? All one and the same thing, for you listeners. Demo trading, simulator trading, paper trading. That just means practice trading. As somebody that does not live in the United States, what platform were you using to conduct all this practice?
Nariman: There’s a platform called Saxo Bank. It’s a Danish trading institution. However, I also used… Their option chain isn’t very user-friendly, because options training is usually something more Americans do. There isn’t much of it here in Denmark. I used thinkorswim paper trade account for three months. Yes.
Clay: Did you have to do anything special for that?
Nariman: Yeah, I had to use a VPN.
Clay: Okay. All right. You got a VPN, being a virtual private network. I think that’s what it stands for.
Nariman: I guess.
Clay: Yeah. Okay. You had to get a little… And then did you have to tell the VPN that you were in the United States or something?
Nariman: Yeah, because it wouldn’t let me access their site. I think that’s… Yeah. [crosstalk 00:16:16].
Clay: Okay. I’m not a super tech guy. That’s where Nate comes into play, the producer of this show. This is my disclosure upfront, and feel free, if you know anything more, Iman, you can correct me. A VPN… Maybe you’ve heard advertisements for them, if you do listen to podcasts. Who’s the one that they’re always advertising on a bunch of podcasts?
Nariman: ExpressVPN or NordVPN.
Clay: ExpressVPN! Thank you, yes. Yeah, ExpressVPN. If you ever heard of them, that is what Iman was using here. Like you said, you can choose what country your internet portrays you to be from. Iman went in there and he chose the country of being from United States, and then by doing so, it allowed him to access thinkorswim. For you international people out there, there you go. There’s a little trading hack. Who do you use? Do you use ExpressVPN?
Nariman: It’s an on-and-off basis. I don’t use it as a routine, every month service.
Clay: But is that who you use to do the TOS stuff?
Nariman: I can’t remember. I think it might have been. It was one of the most popular ones. It was last year that I did it.
Clay: Okay, all right. Well, I’m glad I asked, because that’s a little… I get it every now and then. “Hey, I’m in another country. How do I go about it?” Where there’s a will, there’s a way. I guess where there’s a VPN, there’s a way. There you go, for you international people. Look into VPNs. Do a little more research on how it works. Thinkorswim, from a paper trading platform, they do certainly offer a nice little… They have a lot of good options tools and all that good stuff. All right. Bringing it back to you. You were paper trading using thinkorswim, you had a 70% success rate. I’ll let you pick it up from that point.
Nariman: Yeah. I realized that this options trading had to do with volatility. One source of volatility is what you would call outside events, and then us reacting to them, and us being the government. And you, in one of your courses, Grow Rich, you point out something very interesting, which is the Federal Reserve’s mandate to have a stable employment and a stable inflation at 2%. What that means is they will do their best to optimize economic conditions. When we have a situation like 2018, or we have a situation like COVID, the economy will be supported. And that, I wanted to understand. It was very like magic to me. When you look into it at a surface level, people start talking about illuminati and crazy stuff like that, and it made no sense at all. I decided to go and read a book, which some of those conspiracy theorists should do once in a while.
Clay: What was the name of the book?
Nariman: Yeah. Mastering Market Cycles by Howard Marks.
Clay: Okay.
Nariman: It gave an introduction-
Clay: I’m glad it wasn’t by Karl Marx. That’s good.
Nariman: No. That’s true. That would be a whole nother alleyway.
Clay: Yeah. Big difference between Howard and Karl. Good. I’m glad that this didn’t spin out of control all of a sudden. But anyway, sorry to interrupt. I couldn’t resist, though.
Nariman: No, that’s true. But yeah, that’s very funny. I learned about the monetary cycle, meaning interest rates and quantitative easing. Yeah, basically those two. They work with fiscal policy, which is the Congress and the Senate. These two drive the business cycle, which is the employment and productivity and growth, and that drives the psychological cycle, which credit cycle, distressed cycle, risk cycle, combined cycle. These things help you to understand where we are, how we got here, and what we have to do when problems arise. And when you know that, you know that you should’ve bought on the 23rd of March, when the Federal Reserve was hiking up its quantitative easing and the government was talking about fiscal policy. That would be a good time not to panic. You shouldn’t sell off, you shouldn’t catch a knife, of course, as you say. But you should look for these signals and then act upon them. And I just figured it out this year, 2020. Yeah. [crosstalk 00:21:41].
Clay: To give a little context, one of the courses… I’ve talked about this before, but a lot of times, people are like, “Oh, Clay, you can’t make any money in the markets, because the markets are rigged. It’s all manipulated.” To which I always say-
Nariman: It’s not true.
Clay: Well, I would say it is true, they are manipulated, they are rigged.
Nariman: Okay.
Clay: But they are rigged to go up. If you are willing to hold, they are rigged to go up, because the quickest way for any country to develop into anarchy and chaos and all of that is for what? For everybody to lose their money. How do the people lose their savings? How do they lose their retirements? Well, if what they’re investing in goes to zero, then that’s going to cause them to actually lose all their money, and that’s not going to put them very happy. And when people are not happy and don’t have any money, then from a civilization structure standpoint, things begin to fall apart.
Clay: My personal theory, and if you just look at the history of things, that’s all governments are doing. That’s what the Federal Reserve and a lot of other governments do. Sure, there can be quote-unquote crashes. Sure, there can be quote-unquote big, big periods of drama where prices are falling, falling, falling. But the government’s always there to step in.
Clay: You think back to 2008 financial crisis. Yeah, the government didn’t step in for Bear Stearns, but after they saw what happened with not stepping in, then they bailed out the auto companies. They did start to bail out the banks. They started to bail out all these people, because they didn’t want chaos. If the markets kept going down, then society crumbles. And I’m not saying that whether or not you believe in bailouts. That’s a whole nother conversation. I’m just saying that, as a whole, governments, they want to stay governments. And the quickest way to not become a government or not have a society is for all your members of society to lose all their money.
Clay: And then you look at it with the coronavirus, and I have all sorts of videos saying, “People, please. Let’s not panic. It’s going to be a bumpy ride, but the government will step in.” And yeah, they step in with all this quantitative easing and, “Oh, we’re doing this, that, and the other.” And you don’t have to understand economic theory. I’m not even going to pretend like I understand every little nut and bolt about what the Federal Reserve is doing. But they’re doing it, at the core, in a simplistic form, to make sure the stock market doesn’t crash and go to zero, because that’s going to cause chaos and anarchy, and those people in power, a.k.a. the government, doesn’t want that.
Clay: It sounds like that little theory on my part really sent you down the rabbit hole to read these other books. I guess my question to you is, are you still trading options right now? What exactly are you trading or doing, if anything, right now? Or are you just focused on your schooling?
Nariman: Sure. I am actually selling credit spreads every time, the VIX volatility indicator,, and I do that in QQQ and SPY, because you can get very favorable odds with very defined risk. And I do that once in a while, because I don’t have a big account. I’m actually creating a resume and CV right now, so after high school, when I go into my bachelor’s, I have plenty of time to work and, like you said, invest into that J-O-B.
Clay: Hey, that is a great ticker symbol, a guaranteed one. Ticker symbol J-O… You’re absolutely right.
Nariman: Defined risk and certain reward.
Clay: And I’m not sure it gets any better than that, when you can know exactly what sort of payout you’re going to get for the time requirement to go in and do the ticker symbol J-O-B. All right. Well, just to be clear, are you doing these credit spreads with real money, or is this still just paper trading?
Nariman: It’s real money.
Clay: Okay, excellent. Is that really the only thing that you’re… Let me take a step back. What helped you determine going from paper trading to real money? Because lot of people out there… Again, it’s a good question if you’re listening to this and you’re wondering or struggling with the same things. When do I actually move from paper trading for my simulator trading? When do I actually move from that to starting to trade with real money?
Nariman: Yeah, sure. One of the reasons that I felt comfortable starting out playing with real money was, as you said, the confidence of knowing certain things. One thing that I needed to be sure of, this is something that is also very true in my real life, I like to have an overall picture of what’s happening and then deduce what to do about that. And then from there, go into the various details, getting into the details after painting the overall picture.
Clay: That makes perfect sense.
Nariman: Mm-hmm (affirmative). And for me, trading covered calls, buying stocks, and reducing your cost basis by selling calls above it. That sort of trading, as well as trading by selling volatility, credit spreads and such. The details, I need a bigger picture view.
Nariman: In this year, 2020, I read that book, Mastering Market Cycles by Howard Marks. And right now, I am working on another book. It is called Applied Financial Macroeconomics and Investment Strategy: A Practitioner’s Guide to Technical Asset Allocation. And that has helped me understand where we are, how we got here, and where we have to go from here. And that clarification gave me the confidence to say that, sure, I will join in with the central bank and sell volatility, because as long as the U.S. is the reserve currency and we have political stability and economic growth, what can go wrong?
Clay: Okay. Let me summarize things. What really got you from paper trading and practice to putting real money in the market was you just understood, like you said, the bigger picture of things, you understood the probabilities and all that. We won’t go too far down that rabbit hole. Just within the courses, if you do things the right way, then you’re going to have probabilities very much so in your favor, assuming, of course, you’re doing it the right way. You understood that, and then, like you said, you just chipped away at it a little bit more with these finer details. And then by understanding all those things, that’s what got you to just cross that bridge to go from practice money to real money. Is that a fair summary?
Nariman: Exactly. It’s a personal risk tolerance and confidence issue. It varies from person to person, and institution to institution.
Clay: You’re absolutely right. Full agreement there. It definitely comes down to personal risk tolerance, and everybody’s going to be a little bit different. Yeah. Well, thank you for sharing that, because that’s always interesting to hear how everybody crosses that bridge. Everybody’s got a little bit different method of when they feel ready to cross the bridge from practice money to real money. Now, how long ago did you actually cross that bridge?
Nariman: Yeah. It was actually in this… I decided that I needed to put it in stone.
Clay: Yeah, carve it in stone. Yep. I gotcha.
Nariman: It was in August that I did that, and then I began, slowly but surely, because we had some school stuff in between. Slowly but surely, I got to [inaudible 00:30:33]. And right now, I have two positions. I have one in SPY, and I have one in QQQ. Well out of my strikes, so I’m very comfortable right now.
Clay: Nice. Okay. What are your average times? I don’t want to overwhelm listeners and go into the mechanics of it all. But when it comes to options trading, it’s not like a day trader where you can buy and sell with at least… Let me take a step back. What Iman’s doing, it’s not like it’s, “Hey, I’m looking to buy and sell within five minutes,” or anything like that. These types of strategies, they take time. And that’s why, a lot of times, people will say, “I can’t trade in the stock market because I don’t have time to trade.” And what that person’s really saying is, “I don’t have time to day trade because I work from nine to five,” or, “I work during certain times, so I just can’t trade the market.”
Clay: But this is what a lot of people don’t understand. And that’s fine, when you’re new and you don’t know what you don’t know. You’re not aware of all these different markets out there and strategies that exist. But yeah, with the options market, which is still dependent on the stock market itself, you can do swing trading, you can do longer duration trades, as they’re called. They just take more time to develop, to play out, and to make money and all that. Which is a good thing, because if you’re working ticker symbol J-O-B, and then you know that in the background, you have these other income streams. Sure, it’s not like a day trade where you buy and sell within 10 minutes. But over time, if they’re still going to be making you money, that’s a nice little secondary form of income for yourself.
Clay: That’s why I’m asking now. How long do these trades actually last? You’re going to hear a number that’s more than five minutes or a day or probably even a week. For you, Iman, what is your ideal duration of these trades that you’re looking to set up and accomplish?
Nariman: It’s one day until expiration. No, I’m joking.
Clay: One day? You’re not doing it unless it’s one hour. Come on, man. What do you mean [inaudible 00:32:36]? Well played.
Nariman: Get in shape. Yeah. No, it’s the classic. It’s 45 days until expiration, of course, because of the [inaudible 00:32:50]. It accelerates the [inaudible 00:32:53]. You need to take your hand off the stove after 21 days, because gamma, which is the… Basically, the risk gets exponentially higher after 21 days. And a day after that, and a day after that, the risk is going to get bigger and bigger. It’s a general rule of thumb, just get rid of the option after 21 days and then open a new position to hedge the risk.
Clay: In other words, these are multi-week positions that you’re putting on?
Nariman: It’s not a get-rich-quick scheme. It’s slow and steady.
Clay: It’s slow and steady, absolutely. But again, to be fair, nothing’s… Even day trading’s not a get-rich-quick scheme. It can be an empty-your-pocket scheme really quickly if you’re not careful. I just want you as listeners to know, because maybe you’re saying, “Oh, this whole time, I thought I couldn’t do anything in the markets because I’m not around to day trade.” But just realize, not only are there other ways to trade the market, such as swing trading, which is basically what Iman’s doing, but there are different asset classes that you can use, such as options, which again are dependent on the stock market, that you can use to still pull money from the market, as long as you go in with the right understanding and mindset. Like Iman was saying, it’s not get-rich-quick. It takes time.
Clay: But again, to circle back to the whole ticker symbol J-O-B thing, if you’re working a job already and you know that, while you’re working your job, there’s some sort of other little magical mystical force out there known as option swing trading working for you and making you money, in my opinion at least, that’s a pretty good gig. That doesn’t sound like that bad of a situation.
Clay: Do you follow the 45 days and then the 21 days? Do you do that to a T, or is there any wiggle room in there? Where do you walk in terms of the… How strict are you in your rules, I guess is what I’m really asking.
Nariman: Yeah. You can’t invest if you’re not flexible. Of course, there’s a little bit of nuance in that as well. If the position starts to go against me before 21 days, God bless, I’m going to get rid of that position. And if it starts to go well out of my strike at 21 days and there is enough credit to make it worthwhile holding it until expiration, sure, I’ll do that. I’ll also do that. I have experience with that. I haven’t experienced much of that in my real trading. However, in my paper trading days, that was the order of the day.
Clay: I like that answer a lot. It sounds bad, because you’re like, “Wait a second, Clay. I’ve heard you other times say you got to follow your rules.” But this is where swing trading options is a little bit different than just a flat-out day trader or something like that. There are some of these little finer details that permit flexibility.
Clay: In this situation, Iman’s absolutely right. Okay, well, when is something happening relative to the time aspect? That’s where options… There is a time aspect to them, because they’re contracts, and like any contract, it’ll expire. But based on when price movements are behaving relative to that contract expiration, there’re some nooks and crannies in there where you’re like, “Okay, well, I’m going to do this because of these other dynamics.” Whereas if it’s just a straight-up day trade with a stock, then yeah, the rules need to be a little bit more rigid, which just goes to show that the markets are a massive place.
Clay: And this is why anybody that says, “Hey, come trade like me, because I have it all figured out.” I’m not saying that person doesn’t have it figured out, but they just have it figured out for them, for their personal risk tolerance. And that’s why you got to just figure out what exactly fits best in not only your own time schedule, but your personal risk tolerance level.
Clay: And before I forget, this is an important question, and I’m sorry if you already mentioned this. How long were you actually day trading for before you went to real money?
Nariman: Mm-hmm (affirmative). Yeah. Are we talking when I finished the courses and then started the-
Clay: I’ll let you define whenever you really thought that you got super serious about paper trading until you went with real money. How long was that period of time for you?
Nariman: It was more than six months.
Clay: Okay. You did not rush by any stretch of the imagination, your paper trading time. I see it probably more often than I’d like. “Yep, I’m done paper trading.” “Okay, cool. How long have you been paper trading?” “Oh, the past week.” It’s like, “Okay, maybe you might. Maybe, just maybe you’re rushing things a little bit.” To be fair, I suppose it could work in some situations, but in other situations, that might be a bit quick. I would not say that you for sure are going to need to paper trade for six months either, but the moral of the story here is, paper trading should be done more than just a couple hours or a couple days, or even really a couple weeks. But after that, maybe there’s some wiggle room in there, depending on what you’re practicing, what your strategy requires and all that.
Clay: And again, to go back to Iman’s point, your personal risk tolerance. What it takes for us to be comfortable is going to be different for everybody. That’s why there’s no universal rule, you paper trade for one month and then you’ll be good. Well yeah, that’s cool to say, but in the practical real world of human psychology in trading, unfortunately, it’s not quite that straightforward.
Clay: Okay, it sounds like you have two positions on right now. Is that by design, or is that the most you can afford? Would you be willing to put on more positions? From a money management perspective, how many positions are you open to having open at the same time?
Nariman: Mm-hmm (affirmative). Sure. I’m right now sticking to major market ETFs because of the liquidity. I usually look at it as… What’s it called? Oh, I’m sorry. I just lost my train of thought. What did you ask?
Clay: I was just asking, how many positions would you normally-
Nariman: Oh, yes. Yeah, I have $1,000 which I trade with. Four positions if I am [inaudible 00:39:33], but two positions when we don’t have much turbulence. Right now, I just have two positions. If we have more turbulence, I will wait for the consolidation after the dip and go [inaudible 00:39:51].
Clay: Very nice. I love how you have logic behind all of your decision. Not that any of this means that you’re guaranteed to make money. Those don’t exist.
Nariman: Exactly.
Clay: You’re definitely not just like, “Well, I guess I look out my window, I look at the stars, and then I decide.” No, it’s like, “No, I’m watching…” It’s very fair to say that you’re using technical analysis quite a bit in your options trading decisions. Is that a fair observation on my part?
Nariman: It is very much. I think they go hand-in-hand, I believe.
Clay: To which I’d agree. But I also know that what you’re doing, you’re looking a lot at just statistics, probabilities. “Okay, if I’m looking to do this, then I want to make sure that strike price gives me that odds,” and all that. We won’t go too far down the rabbit hole. From the numbers and probability and statistics versus the technical analysis, are we at 50/50? What kind of breakdown would you say that each has in your analysis and decision-making?
Nariman: Mm-hmm (affirmative). Sure. It’s very funny, because you see how efficient the markets are when you look at the options chain, because you can go and look 45 days from now looking at 30% probability of losing money, meaning you have 70% chance of winning money. And very funny enough, that’s exactly where we have very strong support levels on the chart. They [inaudible 00:41:34] each other, they often confirm each other.
Clay: Isn’t that amazing how the markets and all that… When you know the right place to look, things just line up, which again, I want to make very transparent. We’re not saying, “And therefore, you’re guaranteed to make money.” We’re just saying it’s not like some sort of random gamble that a lot of people seem to view the markets as. Yes, the markets can be used as a casino. You can totally treat the markets randomly, and you’ll get random results. Nobody is denying that. But what we’re trying to get at, and if you just listen to Iman, you can see that he’s actually got a strategic thought process in place, which doesn’t guarantee him money, but it’s certainly shifting odds in his favor. You know what? If I apply patience, if I do things the right way, and if I put together and follow the rules of my general philosophy here, you can definitely make things not random. Again, that doesn’t mean that they’re guaranteed, but they’re not random in the sense of what’s most likely to happen. And based on those decisions, you can start to actually get some consistent results.
Clay: But yeah, it’s crazy how you look at those numbers, and those numbers, in combination with the [inaudible 00:42:49] chart, because I know where to look, things just start to match up. And one of those things, I’ve been doing this over a decade, and my mind is still blown every time. It’s like, “Wow, that’s crazy how that works out.” Isn’t it also funny how you think… Especially, this is very apparent in the options market. You think you can try to outsmart the market, but like Iman was saying, isn’t that crazy how the market is so efficient that it’s like, “Nope, I know what you’re trying to do right now, and we have that factored in because of this, that, and the other.” Isn’t it amazing how efficient the market, especially from the options perspective, actually is?
Nariman: Yeah. That’s one of the reasons why I was so fascinated by the concept of volatility. As soon as volatility happens, almost all asset classes at all stocks become correlated, meaning we have a dispersion of opportunity where we can, as technical analysts, go in and reap rewards because of our education.
Clay: And that’s the hard part, though, it’s because of education, meaning you don’t just watch some 10-minute YouTube video and like, “Hey, I got it all figured out. Let’s go reap the rewards from this volatility,” or what have you. It’s not impossible, but it also doesn’t happen overnight. There’s an effort that goes into it, but there’s a lot of opportunity out there when you actually know what you’re doing.
Clay: Now, how much time are you actually spending looking at the markets, coming up with these strategies and stuff like that? And I ask from the perspective… Again, we’ll continue on with the theme. Somebody’s ticker symbol J-O-B, maybe they don’t have all day long to be sitting in front of their computer. Where in your schedule… You’re a perfect example. You’re going to school, so you have a course load. How much time are you spending on quote-unquote stock market stuff, and where does that fit into your daily routine?
Nariman: For me, it’s in bursts, meaning that some days, I just don’t talk or look at markets. And then I have days where-
Clay: At all? You don’t look at it at all?
Nariman: Yeah, at all.
Clay: Okay. Cool.
Nariman: Yeah. And then I have days where it’s all day markets. But if you average it out, averaging it out, it’s plus, minus an hour a day. Sometimes more. I’m not a statistician, so don’t quote me on that.
Clay: Exactly. I won’t hold your feet at the fire like, “Hey, listen, you said an hour, and you were actually two minutes off, you little scumbag.” No, I won’t go that far. Now, I have a question, though. On those days where it’s a whole lot more, is that because it needs to be, or is that just because you enjoy the markets as a whole, so you’re just spending more time looking at stock market stuff?
Nariman: It’s pure passion. It’s forgetting to brush your teeth, sleeping weird places, and forgetting bathing. Greek philosopher stuff.
Clay: Yeah, exactly. But it’s not a situation… And I ask, because I can see somebody, again, that’s working full-time or whatever, and they’re saying, “Wait a second. That’s great that some days, you don’t even need to look at it at all. That’s fantastic. That would fit my schedule. But to hear that some days, this guy is spending all day, I can’t do that.” Correct me if I’m wrong, what you’re saying is you only spend all day because you just love this stuff. But it’s not like you actually would need to do that. Is that a correct-
Nariman: Sure.
Clay: Okay.
Nariman: That’s right. That’s a correct assessment.
Clay: For most people, would you agree that they could get away with setting up the trade plan, and then after it’s on, maybe checking in 15 minutes a day? Would you agree-
Nariman: Definitely.
Clay: … that would be reasonable?
Nariman: With options trading, when I was paper trading that 45 days until 21 days, that was looking at it once every two, three days, and then maybe using the weekend to spot new opportunities and managing positions. You could go deep, but you don’t have to.
Clay: Right. Okay. And that’s a great point. And I get it, it may be, “Wait a second. Now this guy’s saying he’s gone days without checking his position?” And that’s very reasonable, because again, this is not… And I understand why you as a listener might be like, “Wait, that sounds crazy, going days without checking.” Again, we’re not talking about intense scalping day trading here. We are talking about swing trading with options. That’s why they’re popular, that’s why they’re beneficial for people that just don’t have the time to be glued to your computer. Now, you don’t have to go days upon days without checking them, but it’s not like… Like I said, assuming that you’re not reading the headlines that the world is burning down. At that point, you probably would want to check on them. But assuming the headlines are quote-unquote normal, then yeah, you don’t have to check them every single day. You can go a couple days.
Clay: I’m glad that you mentioned the weekend part, because maybe they’re saying, “How am I supposed to find new trades? Where do I come up with my new trade ideas?” Well, that’s where the weekends or nights or mornings can come into play. Where there’s a will, there’s a way, but I just want you as a listener take that there is opportunity out there, even if you have a very hectic full-time job. You just need to look in the right places and you need to understand the right markets, because yeah, there are definitely things out here. Again, to continue on, none of this is get-rich-quick. We’re not saying that at all, but it is a way to create a nice little income stream for yourself and be able to still accomplish other stuff at the same time. Do you have a ticker symbol J-O-B, Iman, or are you just strictly a student right now?
Nariman: Yeah, I’m a student right now. I’m working on my resume, putting your courses in it and trying to get a job here after my high school.
Clay: Awesome. That’s good stuff, and I like that you… You said you’re 21, right?
Nariman: Yeah. I can drink.
Clay: 21 and got all sorts of life ahead of you. You’re already so much ahead of, I think… I don’t know. I don’t want to speak for other people. Your friends, do they think you’re crazy when you’re talking to them about all this stuff, or are your friends in the… Where do you sit? In my mind, I don’t think many 21-year-olds are out there doing what you’re doing, but I could be wrong.
Nariman: Sure. I have a friend who started his master’s in economics, and he can talk a bit about it. He can’t go into details like we do. That’s a rarity, which I really appreciate. I have two acquaintances who are interested, but again, not as deep as we are into it.
Nariman: Can I tell you [inaudible 00:50:10], Clay? I really appreciate what you do here. It’s a quote from John F. Kennedy. What you’ve done has very much inspired me and the route that I want to go with my career. He said, John F. Kennedy, “The educated citizen has a special obligation to encourage the pursuit of learning, to promote exploration of the unknown, to preserve the freedom of inquiry, to support the advancement of research, and to assist at every level of government the improvement of education for all Americans, from grade school to graduate school.” What you do here, educating people, it’s invaluable. You can’t put a price on it.
Clay: Well, thank you. Now, my only question is, did you recite that from memory, or did you read it?
Nariman: No. We have a history class, and I love to find quotes from important people.
Clay: You said that from memory?
Nariman: Oh, no. I have a list.
Clay: Okay. I was going to say. That’s extremely impressive. But no, that’s a good quote. That is a good quote. I guess as cliché as it may be, there is power in knowledge, or knowledge is power. Either way you want to say it, it’s the same thing.
Clay: I’m not going to say what Iman’s doing is easy. I would never go that far. Am I going to say that it’s rocket science? Would you agree that it’s not rocket science? Sure, it takes effort. Sure, it takes practice. Sure, it takes understanding. But it’s not necessarily rocket science, is it?
Nariman: I suck at math.
Clay: Do you?
Nariman: I just do. If you put calculus in front of me, I’m going to have a seizure. All right? I can’t do this.
Clay: I’ll make sure to keep the calculus textbooks away from you.
Nariman: I’m more of an organization guy. I like to talk to people, get in sync with people, understand concepts. You don’t have to be good at math at all, but if you’re good at math, I think you should pursue this.
Clay: But to your point, I fully agree with you, actually. I don’t think it’s a math issue when it comes to what you’re doing. I think you nailed it. I think it’s an organization issue, because-
Nariman: Exactly.
Clay: … with what you’re doing, swing trading options, there is certainly an organizational aspect that comes with it. In this day and age of technology, man, those platforms, they do the math for you. And as long as you can understand what a percentage is, what percentages represent, the basic understanding of math… Yes, you need to understand what a percentage is, what a percentage means. But if you have those basics, then… Beautifully said on your part. It’s more about, can you get organized? Can you organize these numbers in a way that you believe you can take action on and make money from? And yeah, a lot of people can and do. I shouldn’t say a lot of people. All your friends pretty much think you’re crazy, probably.
Clay: That is a fantastic way of looking at it. It’s not, “Are you good at math?” And not even, “Are you good at organization?” It’s, “Are you willing to get organized? Are you willing to be better at organizing things?” That’s not even really just what you’re doing, but trading as a whole, when I stop and think about it out loud, that’s basically what it is. When somebody says, “Build a strategy. It’s got to have rules. What’s the criteria of your strategy?” Which are things I’ve said now, over the years, thousands of times on this podcast. But really, what I’m saying or what anybody is saying is, “Hey, you got to get organized.” And that’s really business 101. You just blew my mind with that. I don’t know if we’ve ever had any perspective of, “It’s not a math problem. It’s just an organizational problem.”
Nariman: One thing that I… Yeah, sure.
Clay: No, go ahead.
Nariman: One thing that really upsets me to the core, I actually sometimes… Yeah, it really upsets me. Is the fact that you, as a kid, never learn in primary school that there are several intelligence forms. You have interpersonal intelligence, meaning being very smart with dealing with people. You have intrapersonal intelligence, which is the skill of knowing thou-self. I think I just said that wrong.
Clay: I know what you mean. Yep.
Nariman: Yeah. And then you have musical intelligence, and then you have spatial intelligence. You have mathematical intelligence. You have natural intelligence, meaning you can see the landscapes and see where the bears have gone, or where the caribou has gone. There are so many ways to be smart, but you don’t particularly know that as a kid. And sometimes, people undersell themselves needlessly, and that upsets me, because we all have value. We’re all full of value, but it’s about manifesting it.
Clay: I fully agree. I would just add, not only are we all full of value, we’re all full of potential, which circles back to… In order to exploit that potential, you just got to figure out what sort of things you’re good at. Again, I agree that the school system is lacking in regards to just helping out and not forcing, but making people aware of, “Yeah, you got value, you got potential. Here’s the key. Here’s the best way to unlock all that potential.” If we’re trying to force a square peg through a round hole, yeah, you can get it through the hole, but it’s not necessarily going to turn out the best and be the most efficient of ways. But yeah, you’re preaching to the choir on that one. If anything… I’m, stupid, okay? Don’t judge me. But what language do you speak in Denmark? Is it called Danish?
Nariman: Yeah, exactly. It’s Danish.
Clay: Okay. I’m just saying this, because listeners, I don’t want to hear your excuses. First time I talked to him a 19-year-old kid. Now, he’s 21. He speaks two languages. He speaks English better than I speak English, and English is my only language. He’s going to school, he’s mapping out, he’s creating income streams for himself, and he’s only… I’m sorry, but I don’t want to hear why you can’t do something. I’m sorry. Iman, he’s one of those data points that I can just refer back to in terms of, “Yeah, I really don’t want to hear your sap story. I know this guy named Iman, and he’s making it happen.”
Clay: But yeah, it’s upsetting to me, too, when I just hear excuses, and I’m think, “No, that’s not right, because you,” to steal your quote, “you do have value. There is potential there. You’re just not doing what you need to do to unlock everything that’s there.” That pertains to every single human. Everybody is good at something. It’s just a matter of, are they going to unlock whatever that thing may be? Do you have anything more you want to talk about? I feel like this is a good ending point.
Nariman: Exactly.
Clay: Yeah, okay. I don’t want to knock you off your soapbox. Are you getting all the… I don’t even know what they’re called. Expressions like knock you off your soapbox. Do you even know what I mean by that?
Nariman: Yeah.
Clay: You do? Okay.
Nariman: Okay. I am one-third American, one-third Danish, and one-third Persian. I see myself-
Clay: You’re like a Renaissance man.
Nariman: Thank you.
Clay: I don’t even know what to… After this, are you going to go practice playing the harp or something, or on the cello? What is next? Or you could be like, “No, after this, I’m going to go build a house.” I don’t know. You seem to be very well rounded.
Nariman: I’d like to share a little thing with you. Sure. It’s very funny that you said Renaissance, because I actually want to create an advisory firm, a consultancy. However, I want to do that in an innovational manner, meaning where I create a café where people are free to come and see the… And then here’s the Renaissance part. Where I fuse Islamic geometric gilding with classical European paintings, as well as playing traditional Oriental concertos with classical European symphonies. I actually do like these classical things here and there.
Clay: I’m not even going to pretend like I understood everything that you just said. All I’ll say is it sounds awesome, and when you get your little café set up in whatever country, whether that be Denmark or who knows where you’ll be in your adventures, will you send me an invite? Can I come check it out?
Nariman: Definitely.
Clay: Okay, because that sounds pretty intense. It sounds way above my intellectual level, though. But hey, man, that’s awesome stuff. I like it. Nothing better than a younger person out there with entrepreneurial-type dreams. That is what it’s all about.
Clay: Well, Iman. Again, thank you so much for not only doing this, but volunteering to do this. And I do apologize for not remembering. Well, I kind of remembered you. I just needed a little bit of confirmation. I needed the MACD crossover. You gave the MACD crossover, and I was like, “Okay, confirmation. We’re going long here.” Thank you very much.
Nariman: Thank you, Clay, for enabling me and enabling thousands of other people. You’re doing God’s work.
Clay: Thank you very much. Now, before you all go as listeners… What a great episode. But before you go, final few things. First off, if you’re listening on iTunes or any other podcast players, then be sure to subscribe. That way, you know when new content is released. And especially on iTunes, if you could leave us a rating, or better yet, a written review, that really helps out, it goes a long way, and it just gets the name of the podcast out there. Little clicks like that really do make a big difference and help us out quite a bit.
Clay: If you’re listening at claytrader.com, on the show notes page, there’s a little live chat box in the bottom right-hand corner of that screen. Click on that, just request to speak to a human. And yeah, would love to hear from you. Nothing better than when somebody says, “Hey, I listened to the podcast.” And then fill in the blank with whether that be feedback or suggestions or whatever. Love to hear from you as listeners, so I look forward to hearing from you, and hopefully, like I said, seeing some good reviews on iTunes and those other podcast players. Thank you to all of you as listeners. Thank you, Iman. And we will see you back next week.
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