The interview you're about to listen to is with: Julia Spina I Really think that you're going to enjoy it because we talked a lot about options, options, trading, and being a degenerate. Julia has a notably unique approach and background when it comes to the world of trading options. She's a former researcher at Tasty Trade, that exact place where many of us learned about training options and she was able to get that position by leveraging her multitude of math-based degrees. So it's pretty safe to say she's way smarter than I am.

Anyway, throughout the discussion, she shares her statistic proven mechanical approach to trading options. I Really think you're going to enjoy it? Welcome! Julia I'm very excited for this conversation because we're going to get to talk a lot about options. How are you doing today? I'm going to not look at my portfolio for a little bit. um, but other days we've definitely all had one of those days.

But yeah, no. I'm really happy to be here. Thank you so much for reaching out! I'm excited to talk options, talk markets, and talk. yeah, whatever you're interested in.

Uh, so for everyone listening I Found out about Julia actually when I read this book I Went to one of the conferences hosted by Tasty and it is the Unlucky Investors Guide to Option Tradia obviously Julia Here is the author and folks: if you're looking for a great step into the world of options or even just a reminder of maybe some of the math and facts and figures you forgot I Highly, highly, highly recommend it and I Obviously want to get into that and generally just have a conversation about options but before we do that, can you explain to everyone like how you even got into trading cuz I think you have a unique background that most Traders at least retail Traders don't have sure? Yeah, um it's it's been kind of a whirlwind the last three years, but a very enjoyable one. Um, but actually yeah I Originally went to school for physics and applied math and most of my like undergraduate and graduate research was actually in like Quantum Optics and information so it was a lot of like working um with like Electronics working with Optics uh working in the dark um and I kind of I loved the research u a lot but I wanted to go into something a little bit more computational so um Finance was just kind of like a it was I don't know there was a a path to it because the data was actually pretty accessible. so I started playing around with financial data basically. um while I was still in graduate school and I found out that I actually really liked it.

um so when I finished my Master's Degree I moved back to Chicago um I found tasty um and then just kind of started doing research there. that kind of like led to the first uh like the first book that I published of like led to me really enjoying content which I was kind of surprised by in doing Financial research for Content creation. um and then all of that and that kind of experience in the retail space ultimately led to my current project which is called bad Trader which is very appropriate for this market right now. Yeah I Love it.

Uh, so obviously safe to say you're not just better at math than me, you're exponentially better at math than me. So is it that math problem? The puzzle? That like kind of got you attracted to trading like please correct me if I'm wrong. but like the math you're dealing with like I feel like you're Ed education that was probably more difficult. did you find this to be relatively easy or is it just a different form of a problem set? Like what about the math puzzle like was attractive to you I think like yeah, the math.

um that I was using like in every pretty much every research project that I used that I did in Academia like the math was I think more complicated but um, it was easier to apply. Because we were working with pretty simplified systems, we had a lab we could control like the different you know like characteristics of the lab like the humidity and the temperature. We could control what was going on, we could measure, we could test things individual components. We had a lot more control over the system, so uh, we had a lot more clarity with regards to the data and what it was representing and how to analyze it.

So financial data is like the exact opposite. It is so messy, it is so complicated it can change so fundamentally day-to-day that even though like the math I think is a little bit simpler at least what I currently use like the actual application of it I think is a lot harder just because we don't have a very you know thorough mathematical framework for describing markets. they're way too complicated at and even the most advanced models fall short in a lot of different ways. So I think like that challenge of figuring out how to apply it like finding edges or inconsistencies and the data I thought was really fun.

So I've been really enjoying that. Yeah, so obviously you're diving pretty heavily into the math. Are you currently trading yourself now with like some of those edges and strategies that you've been finding through your research and data mining and whatnot? Yeah for sure. So um, actually a lot of what I do day-to-day when I trade is like not like terribly rooted in data just because I found out pretty quickly from doing a lot of these back tests that you kind of have to take back tests with a grain of salt and you kind of have to assess the market from a holistic perspective.

So sometimes like when you're looking that at 2008 or 2020 or just regular bullish market conditions, they can be so fundamentally different from how the market is. Now that you kind of have to like know how to let statistics guide you and let back tests guide you, but ultimately make decision based on current information and based on your current assessments of the market. So it's kind of like a mix of qualitative and quantitative. I think Um, but yeah, they definitely influence a lot of my broader strategy decisions.

So for everyone listening, then when you're engaging in the market, are you like buying and shorting equities, are you dealing with Futures Are you dealing with cryptos? or is it exclusively options? Like what is the asset class that you're mainly trading with? Oh yeah, so I'm mostly trade options, but it's pretty like one of the principles that I guess we use that you know, like tasty and that I use myself is like underlying indifference or product indifference. So the underlying product could be a future. it could be an ETF It could be a stock. um, it could be pretty much whatever.

But the mechanics of the options um, don't actually change that much regardless of what you're actually trading. So I like Futures options and I like ETF options and stock options I think my go-to bread and butter are like ETF options just because those um match the size of my account pretty effectively. Um, but sometimes I'll go into a Futures options and sometimes I'll I'll experiment with other stuff too. but yeah, mostly options.

Well, as we're saying options, options, options I'm sure many people listening right now are more than excited cuz Hey A lot of people listening love to degenerately trade options. so with that I kind of want to give you some interesting questions and maybe we'll split it up into a different part. So for people who let's say have a smaller account definitely below PDT below 25,000 in your research and your personal experience, Is there a strategy or methodology or just like an overall system that you think is most ideal for small account options trading for sure. Yeah, that's something I actually like heard a lot of when I just started which is like you.

it's very hard to trade options with a small account I Kind of personally took that as a challenge to figure figure out. like what mechanics are scalable between account sizes like what mechanics can I apply to a 5k account 10K account 15K account that also are applicable to like a 50k account 100K account. Um, because like a good strategy should be relatively scalable regardless of account size, you want the mechanics to be or at least like a skeleton of them to be um, pretty fluid regardless of how much money you're actually trading with. So that was like kind of a fun challenge to figure out.

like what might be better for a small account versus a bigger account and what similarities are there strategically? Uh, but I think like just generally with short options like selling options which is mostly what I do? it's It's basically like owning a slot machine. So right, like you're making small profits most of the time, you're profiting most of the time. but you might have to pay out a jackpot, um, at some point. So in my opinion, regardless of whether you're trading in a 5k account, 10K account 25, 50? whatever.

Like, in my opinion, your goal is to stay in the game as long as possible because um, eventually you make money when you own the slot machine. But those jackpots, if you don't manage that position size appropriately, can can drown your account pretty much of any size. So um, when I'm trading with like a small account and also large account like position sizing is easily the single most important thing. And when I'm with a small account, my go-to personally is either like spreads or iron.

Condors Um, mostly iron. Condors because whenever I try to make some kind of directional assumption, I'm usually wrong. So I would much rather trade. uh, volatility in time and that's how Iron Condor Because their neutrally, uh, neutral strategies normally, um, normally make money.

um, pretty pretty insensitive to directional moves. So um, that's a lot of what I do. and I kind of try to keep the like again with making Uh rules that kind of scale between accounts between like 5 to 7% of your max or of your net uh, liquidity of your portfolio generally Max per position size. Um so again, like you can trade pretty much any underlying with options.

It just depends on what strategies are available for your account size. So iron Condors um are generally a little bit better for me. Quick refresher for everyone. I Believe in Iron Condor is whatever the at the money price is.

you go up, you go down and you're basically doing credit spreads a call Credit spread and then on the south side you're going to be doing a put credit spread. So you're going to be selling the premium on the call and the put that is closer and then the farther extreme ones you're going to be selling that call and selling that put. So with that in your research, is there bread and butter for your days till expiration? Your Deltas Are you doing the classic tasty like just 20 Delta 15 Delta Or is there something like do you like to make it a little bit closer a little bit farther away? where's your comfort level and what does the data suggest is like quote unquote ideal so that that size that position cap um in terms of like having like a position probably shouldn't take up 5 to 7% more than 5 to 7% of your uh net liquidity. um is ultimately I think going to dictate how that position is structured so like for an iron Condor I Like to collect a decent amount of credit, but I also like to have my pop speed pretty high while also staying within um those Capital constraints.

So a lot of the time what I'll do is I'll look for more expensive underlyings like $300 $400 underlyings. Sometimes even the Futures and I like to go very wide on my short strikes a lot wider than like what the tasty mechanics would stay. So I might do like. um a 12 Del a 13 Delta 12 Delta for example.

Um, for something that's a very large product just to keep the position size small. but because the short strikes are so far from at the money, the PO probability of profit is quite High while also having the position size that's appropriate for my account, um does so that's kind of like I tend to go like much wider and then um for my short strikes, it's definitely the preference. So I as a result, tend to look at even more expensive underlyings actually. Um, but that just means that there's a bit more constraints on how like tight those wings can be.

Does that make sense? Yeah, definitely. And do you like to manage halfway through or do you let it run all the way till expiration and you're trying to collect all the premium? So in terms of your premium capture rate 100% 50% or just is It a certain time based thing and you just shut down the position after X amount of days pass. it really depends on the market for me. So um, for instance, like uh, you know if there's a really big move in spy to the upside and I have a position that's only at or to the downside, there's just a very big move in spy, there's a Vol pop in spy and I have an existing position on that's been on for whatever 15 days it's at 20% the initial credit.

but because there's new volatility, it might prompt me to like close at a lower percentage of profit of like 20% rather than 50% or 70% and move to the next expiration cycle. So I can capture some of that volatility. um, if the Market's like, maybe a little bit more boring and I put the trade in when the volatility was high, I might want to leave that position on even past 50% to collect a little bit more if I'm not expecting volatility to pop anytime soon. so it really depends on the market.

Obviously, like Target for iron iron, Condors is more like 30% just because. um, they tend to take a while to accumulate profits. So I I generally like to I think the capital would be more efficient to move towards more volatile products after it gets to like 30% in an ideal world is 50% though. Gotcha I Love that and I think it's been proven many times.

Many research papers, videos, books, this thing, that thing. the other thing that's a very reasonable, mature, profitable way to engage in the market. But right now, in the world of retail, a lot of people love to do things that are a bit more degenerate such as zero DTE So I'm sure you've done studying of it. Have you ever traded zero? DTE is have you found any profitable way to trade it? Whether you're going long or short premium? what are your thoughts on Zer DTS in a general sense And then when we hone into it, what is your research found? Okay, yeah, for sure, sure.

and zero DTE Um, I Think this is kind of, um, Akin at least a little bit to like earnings trades. So like earnings trades because there are so few occurrences. um, like Apple's reported what earnings a 100 times in the last 20 years. Um, and because those trades, uh, tend to be so volatile.

or yeah, 20 100 times in the last 20 years? Yeah, and because those trades tend to be so volatile, it's kind of difficult to gauge really meaningful statistics and averages on those strategies. It's kind of the same with Zero DTE Because the strategies themselves be so volatile, it's actually very difficult to tell where the edge is. Um, what types of strategies? uh, have certain risk reward compared to others. So in my experience, I've just had pretty bad luck with zero DTE options? Um, even though the math doesn't suggest this and the market theory doesn't suggest it most of the time when I've made money on them, it's from buying options and just getting lucky.

Um, which? Like, there's nothing wrong with trading more speculatively. and when I say speculative I usually mean like low probability of profit High volatility trades, but that just means the position size has to be appropriate for the type of trade that it is. Whether it's an earning play or zero DTE Trade? um or whatever. Um, so I think with zero DTE just because in my experience and I think the research might suggest this as well, they're kind of a crapshoot.

Um, you just kind of generally want to stick with small positions, highly liquid underlyings and you definitely want to choose an underlying that has a settlement method that's consistent with your account size and with your Preferred Management style, right? because you don't want to get hit with the PDT Rule and you don't want to be on the hook for shares. So um, depending on how big your account is, um, you might just be stuck trading futures or indices. or maybe you have more flexibility with like stocks and ETFs But uh, I think that's the biggest one actually for me at least, is picking an underlying that's consistent with the account size and the settlement method. Now obviously we're talking about Iron Condors and spreads and zero DTS So maybe for someone who's like a little bit newer to the market, this might seem a bit foreign.

So you yourself have been trading now for a couple years, but when you first started obviously a strong math background with where do you think is the best place for someone who's like oh, I've kind of heard those terms, but options still scare me I'd rather just invest in stock. where do you think is like a good place to get going obviously beyond your own book. In my experience like I went to school for experiment like as an experimentalist I like getting my hands dirty I don't always learn very well from just like reading something and not really applying it. so I think like yeah, the best way to learn is to actually get your feet wet and with options, um, it's It's kind of a different world because they're leveraged, right? So that makes sizing a position much more complex than with stocks for example.

Um, because they can be undefined risk the loss could potentially be the loss is not defined on certain types of positions. Um, you makes position sizing and getting like a stomach for those more volatile moves a little bit harder, right? So I feel like it's always good to just kind of like put on a small trade probably defined risk, probably in something that's pretty, um, like a diversified underlying like an ETF for example, maybe like a spy spread or a spy iron Condor that's very wide with a high probability of Profit just to get a sense of how options move relative to the market because those volatile swings can be, they can take a minute to get used to and also like taking a loss, especially when your account is small and when you're a new Trader can really help you figure out like how much um of a position size you're actually comfortable with. Um, so like assessing risk is very difficult with stocks, but even more difficult with options and I think yeah, just putting something on even if it's small, even if it's defined risk, even if it's a high probability of profit. um, can still help you get a sense for like, how much you're actually willing to lose and how much, uh, like how much you actually want your risk reward to look like or what you want it to look like.

So obviously the way you engage in the options Market it's pretty mechanical, pretty systematic. You have the values you're looking for and it seems like it's a wash. Rin Repeat. Have you ever done this? or have you ever considered doing it in the world of equities? Futures Crypto even I'm just like I don't know if Es or NQ breaks out of like a 10day high.

you go long. Have you done any of that type of research or is it more of like your very very honed in on options exclusively? So I've looked into different because like especially like for training like machine learning models and for writing a lot of like a lot of the early codes that I wrote for trading were all focused around like equities um focused around Futures as well doing like some technical analysis um a lot of like machine learning models like will look for technical indicators and use those to make trading decisions. so that's like I definitely got an introduction to that. um I did uh quite a bit with like Paris trading as well which uses like the equivalent of Ballinger bands basically and building models based on that.

but I feel like um I personally just have a system and for me, the system has been working and it's also very rigorously thought out. and I've been getting my toes wet a little bit more looking at technicals, looking at fundamentals and using those for instance to guide like how to structure an option strategy. but for the most part like the core mechanics are there and it would be an addition to that. Does that make sense? Yeah, definitely.

So actually you said something that's interesting there. So before you started looking at the technicals and the charting were you actually just looking at the option chain and you're like oh this is like a good Delta this is good expiration you weren't really considering. oh is like the chart breaking out or breaking down like that didn't cross your mind or were you kind of even from the get-go looking at both of them I was kind of I I definitely looked at the chart like charts, but usually not within the context of like technical indicators. I would do like maybe like guess again, normally what I trade is like volatility I Prefer to make directional assumptions around volatility rather than price.

so I might reference the price to make certain decisions around like strip price. um, but that and that kind of stuff. but usually like the volatility and the options chain can give you a pretty good representation of like How Likely that stock is to move in a certain direction, at least based on the sentiment of the market. So um I I've found ear.

This is a controversial topic, but I believe that markets are pretty efficient and investors for the most part are pretty good at pricing moves and an options chain gives you that representation of the market sentiment. So I'll usually reference the price and I might look at like certain like uh, like moving averages for example. um and that kind of stuff. but for the most part like I feel like you can get a lot of that information from the options chain as well and that's usually how I'll Define my strategies and tying the option information back into probabilities.

Um, just B Rooted in mostly the black Shs model. Yeah, man that that I Think Very insightful and it's a unique way to look at the market. I mean I think a lot of people who are successful in trading look at it that way. but in the world of retail I think some of that math ends up being a little bit opaque.

or maybe the research or the computer science where it it's difficult. So the fact that you've already found success. but you just really attacked it. Not from like oh, I'm going to be a Trader more of like hey, I'm good at math and I want to solve this problem I Find that to be interesting.

So we were talking about a small account and you were talking about scalable. Like if you're trading at 5K you want it to very nicely scale up to whatever 50k are. there certain things though that are only available if you have a larger account. Like all of a sudden, let's say hypothetically, uh, I put $5 million in your trading account.

Is there something that you would be doing differently? Are there new strategies that like the door would open for you? or are you very much like no I scale it. It doesn't matter if it's 5,000 all the way up to 5 million I would do the same thing just bigger lot sizes. So yeah, the um, the strategies are going to differ I think depending on the account size so like I would have spy in both portfolios I would have maybe like gold bonds like I'd have the core you know, like Diversified underlyings in the portfolio whether the account is 10K or whether the account is like a million dollars, right? Um, and the the strategies for the smaller account are going to be a lot more restricted like I can trade strangles in a 5k or 10K account. but um, that would take up probably most of the account and it's probably not good from a risk management perspective.

So that's why I think like the iron Condors are a little bit more appropriate for the smaller account and then in the bigger account, you can kind of like go into more, um, undefined risk territory. and that's when the mechanics are kind of kind of change a little bit. That's when like, stop losses become significantly more important. That's one assessing tail risk even though the tail risk is highly unlikely, but that that is still Capital at risk for a specific position.

Um, and you want to make sure that you have all of those bases counted for because if you have a strategy that has a probability of profit of 80% that means there is risk somewhere else and you definitely want to be accounting for it. And so when you scale to that larger account and move to those larger, whether it's larger lot sizes or undefined risk strategies that take up more Capital you want to make sure that like the actual Capital At Risk in different Market scenarios is taken into account. So um, yeah, I think scaling the position, especially when to get to like million doll accounts maybe like 5 to 7% is a little bit too big, but it can be simple. as simple as taking those core underlyings like the Spy the bond, whatever oil and then adapting the strategy to take up larger portions of the account size.

And then when you also get to the larger account size, there's a little bit more room to have fun. like maybe do more earnings plays or maybe do more zero DTE But again, it's about sizing positions appropriately. Um, there's also like I think a common misconception which is like oh, if an iron Condor right takes up a much smaller amount. Uh, you know of capital as like a strangle, which is like the undefined risk equivalent of the iron Condor why don't I just take all the capital that I would have put in the strangle and put it into the iron Condor That's well, if you can buy 25 iron Condors with the capital of one strangle, if all of those iron Condors take losses at the same time.

Um, that can account to or amount to much more risk than the single strangle in the same sort of outlier move, right? So I don't think it's as simple as just increasing the lot size. You definitely want to change the types of strategies as well. Um, and there's then taking into account those subtleties when it comes to, uh, the risk profiles of those undefined risk strategies. just I Guess a little bit to like.

Bring some of this together when I was doing my internet sleuthing on you to prepare for this. I've noticed that after the book you went on a book tour. You're explaining a lot to options, but that gave birth to a new thing and I believe you're now the CEO of a Dgen social network called Bad Trader Uh, could you tell the audience a little bit about what that is and what your goals are with it? the U Oh so this has been kind of fun and we're still figuring out the branding. um, a little bit just to say.

but um, basically we wanted to kind of take. uh, we wanted to basically build a social network around trading and we the best way that we thought to do that was to take like basically twitch and mix it with Finance. So what? this basically what this is is like. we have a streaming component, we have a live chat component.

We have some like fun engagement features like you can earn Badges and you can use in-game currency to kind of like deck out your profile. and then on the other side there's a portion where you can connect to a broker and you can watch markets and you can kind of have like allinone. And it's what we're trying to do. Basically is we're trying to like teach, especially younger investors, especially maybe like investors that are like 18 to 25 that have small accounts that are just getting started with markets.

We kind of want everybody to learn from each other's mistakes so that eventually when they do invest more, if they choose to do that, they're not going to make those mistakes. And part of how we're trying to do that is by showing our own hosts. A lot of our hosts are like, you know, we pick them out, they're in college, a lot of them are like 21, 22, 23 that have made many mistakes and they make mistakes on stream so that we can all sort of learn together. I Guess, um, and so that we don't you know, necessarily make the same mistakes twice and we can kind of get them out now.

And so that's why it's called bad. Trader It's because like there's a time and a place to be. The Bad: Trader Um, there's some utility into it if you can learn how to learn from your mistakes and this is hopefully the place to do it. So that was kind of the idea behind it.

Yeah, that definitely sounds exciting. I'll obviously be signing up and folks if you're listening, I'll make sure it's in the description below. Speaking of that, if someone has a question for you or just wants to track what you're up to, where's the best place for them to like? I guess connect with you or find you on the internet? Sure! so you can find me streaming on the app we also stream to YouTube Um, my Twitter is finance Photon so you can find me there as well. Um, and then you can also send me an email I can just give it to you so we can put it in the description or something like that.

All right. Yeah, so everyone, folks, if you're listening, it'll just all be links below. It'll be a click away. Um, but overall, this is a fascinating discussion.

I Appreciate you sharing your expertise and doing giving us a little bit more of a mathematical deep dive so hopefully we could have you on in the future as you find out new cool things. but for me and the audience truly appreciate your time. Thank you so much.