John Gilner was a successful business owner prior to becoming a trader but as he says, “Trading is a whole different animal.” He's very successful now but it took him a while and he traded several different markets in order to find the one that worked well for him. He started with options but had trouble getting consistent results.
Tim Bourquin: John, can you explain how you find good trades?
John Gilner: Because I am primarily focused on index options, there's a good measurement for that volatility and therefore, the price of the options of course is the VIX. And so, the basic principle there is you need to develop an ability to understand if options are priced high or priced low relative to the expected volatility of the underlying instrument. So, during the course of trading options, what I was always trying to do is sell expensive premium and buy cheap premiums. And so, you're generally always looking for ways to buy cheap and sell expensive. In all of trading, you have to try to be careful not to think of it like you would think of a salary that you earn at a job because my experience at least, is that my profits are a lot more lumpy from that. That's in a general sense.
Now, I think when it comes to option trading, that's even more true because what you're trying to do in option trading, particularly, well, it's really true on the long and short side but particularly the short side where you're trying to sell expensive premium. Those opportunities only come along so often. So, your profits are very, very lumpy in that case. Yes, you can make a living at that. The problem that I found with it is that in a market that can open up 3% or 4% down on an index, I'm talking about now, it's real easy to get caught on the wrong side of it for reasons that are totally out of your control. In other words, if you're a technical trader like I am, trading on the technicals during the day is one thing but having substantial overnight news risk and that type of thing is entirely another.
And so, I think you can make a living out of it but my personality is such that I would…
