email: alex [AT] mytradersjournal [DOT] com (Email me whatever questions you want, but I’d prefer to have most questions asked within the blog so others can benefit from our discussion.)
LinkedIn Profile: www.linkedin.com/in/alexfotopoulos
I’m Alexander Fotopoulos. I’m 44 years old now (born in 1971). I live in Atlanta, Georgia (yes, we have computers down here and understand finance). I’m married and have a 12 year old son. My wife and I both work full time. I’ve worked in the past as an IT Project Manager and an IT Recruiter. Near the end of 2009 I opened my own Investment Advisor firm and went full time on the advisor side at the end of August 2012. I started trading/investing as both a hobby and a way to have an extra source of income. Once it dawned on me that I could have a career doing what I love to do without working for someone else I started pursuing investing as a profession. Each year I start with $100,000 in this account and don’t make withdrawals during the year. At the beginning of the next year, I withdraw any amount over $100,000 and start over. The profits go to another account that has a shorter time horizon and is much more boring to watch than this $100k account. These are both separate from our “savings” that I keep in a money market and a “CD ladder” I built.
Although I am a Registered Investment Advisor Representative, this site does not represent individual investment advice. My writings are meant to give some methods and picks that you might not have thought of and a glimpse into how I personally invest. All comment replies I make are intended to represent how I would handle the situation if it was my money at stake, but it might not be the best advice for your situation. Therefore, please trade using your own research on top of anything I write that works for my own personal situation. I am not responsible for any of your trading losses.
I opened my first mutual fund account when I was 22 years old (1994), just after college. I opened my first trading account about a year and half later, soon after I turned 24 (1995). The fees to trade in my account were fairly high back then and I didn’t have much money, so I spent a lot of time learning and wishing I could jump in without commissions eating up any potential profit I might luck into as a rookie.
In 1997, we bought a PC for our house which allowed me to spend more time doing better research with real time data. In 1999, I finally opened an Ameritrade account and jumped in feet first during the last throes of the tech bubble. I loved it and did well (as everyone else did at that time). At a low key New Year’s Eve party the following year a friend of mine who was a financial advisor at the time introduced me to the idea of selling covered calls. I updated my account to allow me to trade options and soon was creating a steady (small) income stream. That was short lived. The market crashed and I was slow to react. I was heavily invested in tech and watched as all of my earnings vanished and my principal withered soon thereafter.
I slowly started to go up and down every year, one year I had a 40% return and the next I was down 20%, wiping out my gains from the prior year. Somewhere in there I read in one of the Rich Dad Poor Dad books that mentioned the ease of selling naked puts. Like all of his books, he oversimplified the whole story and left some big gaps. I read a lot more on the Internet and some good books and still figured this was a good plan for me.
I started slowly and again did well pretty quickly so I went full throttle immediately and it ended up costing me if for no other reason than I didn’t understand the margin requirements before options were assigned to me. I ended up having to exit positions early where I had picked the stocks correctly, but they dipped at the same time volatility increased and caused margin calls and early losses where I shouldn’t have had them. The lessen I learned was that running so close to being fully invested on margin with no room for a dip was going far beyond simple greed, even surpassing grossly gluttonous. I backed off and my good years returned. It took years for me to learn the benefits of hedging and taking profits before expiration when I could lock in the majority of my targeted gains.
I thought I could squeeze more income from the same stocks by selling naked calls on the same stocks I had sold naked puts, but found that I ended up making a few bad picks and the earnings I was making on one side was being eaten by the losses I was sustaining on the other side of the trade. This strangle approach can work for someone who has time to really follow the underlying stock throughout the day, but my job was too demanding to allow me the attention I needed to devote to it. Again, I backed off my new greedy approach and returned to my positive returns gained by only selling naked puts and covered calls. I resumed this approach near the beginning of 2008, but only in small trades as I continue to be a long term bull and would rather be forced into a long position from a naked put than a short position from a naked call gone wrong.
I loosely followed that somewhat undefined model for a while and did pretty well, but still had not truly defined the criteria I was using to make my trades. In 2005 I read an article in Fortune about the predictive market Intrade.com. It sounded fun and ended up swallowing my attention for a year as I traded the Dow contracts every day with high probability of success, but with high risk and low to medium return potential.
During my Intrade days, I wasn’t spending the necessary time doing research on individual stocks and moved my accounts (I also manage my own IRA and my wife’s IRA that that houses money we’ve rolled over from 401ks started in jobs long past) into ETFs. I spent time working my real job (outside of 9:30-10:00 am when the Intrade action really moved), stopped trading much and moved money into Vanguard ETFs: VB, VO, VV and VWO rather than individual stocks since I didn’t feel like I was making much progress compared to what the market could do on its own.
Finally, in October 2006, I got back into active stock trading again slowly. I made one trade using the little cash I had not invested in ETFs, then another and finally I was fully invested again based on individual stocks. Since I eased back into individual stocks I never took the time to sell my ETFs. Both were going up, so I let it all ride. Since I was selling puts rather than buying stocks when possible, I didn’t have to use margin (yet).
I kept my ETFs until January when I decided to take my profits on all of them and reduce my exposure to the daily ups and downs of the markets in general. Keeping the ETFs in my same account distorted my view of how my “trading money” was moving daily. I also saw the writing on the wall that the bull was getting tired. I didn’t quite time it perfectly, but did OK considering what I did with the money in 2007 trading options.
Although I was trading again, I didn’t think about writing it all down at first although I’ve always heard it’s important to keep a trading journal. After a few more months I found out I needed surgery on my vertebrae and decided to write for my son so that if anything happened to me on the operating table, my knowledge of trading would not be lost.
The basics of how my plan works are not too difficult to explain, so writing an entire book didn’t make sense at the time. It could be summarized in a long memo. I’ve explained it to friends before and it always seems simple, but what dawned on me is that my explanations to them always accompanied real life examples of how I chose stocks/ETFs and why I chose the trades that I did. Since I started maintaining a trading journal at the beginning of 2007, I decided to incorporate that into my guide that I was writing for my son and while recovering from a successful surgery in late March 2007 it dawned on me (after reading an article in Smart Money on Blogging) to move my journal to a blog. After another strong year of returns in 2012, I decided I could turn my blog into a book for those who don’t like reading on the Internet and in early 2013, I published my first options trading book.
I’m still a small time investor by most people’s standards, but how I trade reduces risks compared the market indexes and beats the indexes some years too. 2008 proved this approach does not work in every market condition and should be adjusted during bear markets. Since 2008 I’ve changed my model a little more again and now view wealth preservation as important (if not more important) as growth. I am not as concerned about beating the indexes as much as I used to be. Now I strive for decent returns with less risk. I continue to search for new ideas to implement and continue to study investing as I believe it is ever changing. In 2012, I started incorporating more put spreads into my portfolio and that’s where I am now, working out the kinks and trying to make as much money as possible with the least amount of risk, even if I do sell some naked calls sometimes too.