Boy, what a year! 2024 was truly an incredible journey. I discovered futures—specifically, futures options. Not that I didn’t know about them before, but I was ignoring them. When I finally gave them a shot (or should I say they gave me a shot?), I was blown away. It was easy, fast, and extremely profitable. That is, until volatility hit the markets in August. Up to that point, it had been smooth sailing; after that, it became a Herculean struggle—and it still is.

We tripled our account in 2024! Our cash grew by 330%, and you can imagine the excitement. I felt like the king of the world, already picturing the golden gates of early retirement. And I traded like that too—which turned out to be a huge mistake. I was intoxicated by the minimal restrictions on trading futures and options: no Pattern Day Trader (PDT) rule, no day-trading limitations, and the allure of capital efficiency. Smaller capital to trade big? Count me in!

But therein lay the hidden danger—not in trading big itself, but in the devilish details of SPAN margining. SPAN is a fantastic tool if you manage to trade small and keep more than 50% of your account in cash reserves. Honestly, 60% is probably safer. The trouble is, SPAN is a black box. You don’t realize what’s happening until it happens—and suddenly, you’re hit with a margin call. One moment your buying power looks great at +$20k, and three minutes later, it’s deep in the red. You frantically close trades to free up capital, thinking you’ve fixed the problem, only to find your account is $20k underwater after the market closes. Digging out of that hole? Not fun.
 

Since August, I’ve been battling SPAN every day. It feels like the market—or SPAN itself—is playing games with me, laughing at my every move. The once-thrilling big gains turned into a defensive war to protect them. I haven’t opened a meaningful new trade in three months. Any trades I’ve opened were small and carefully designed to increase buying power rather than risking further losses.

SPAN feels like it was designed to drive traders mad, not to facilitate regular trading. But the lesson was crystal clear: money management is everything. If you want to dive into this world, I highly recommend Nauzer Balsara’s excellent book, “Money Management Strategies for Futures Traders”. There, you’ll learn just how little it takes to completely ruin yourself—and how to do the opposite to stay afloat.

This year was a steep learning curve for me, and I learned it the hard way. We didn’t get wiped out—yet—but I wish I’d spent more time understanding SPAN margining before opening trades like there was no tomorrow and counting on big bucks rolling into our bank account. Now, I’m praying for volatility to ease up so SPAN gives me a break – so I can trade big again! (And no, that last part was sarcasm.) I’m committed to staying small: using no more than 30–40% of my available buying power and opening new trades only after the old ones are successfully closed. If I need to adjust trades, I’ll wait patiently until they’re fully resolved.

This is my New Year’s resolution!

From now on, I’ll manage open trades to a successful close before applying strict money management strategies. These include closing trades at the profit target, using stop-loss orders on futures themselves, and avoiding overloading my portfolio with too many futures options—because I’m not waking up the SPAN beast again.
 

The recommended time to start investing for someone with no investment experience depends on many factors. There are a few steps I would recommend doing:
 

1. Set a goal. The goal can be created by answering questions like: Why do you want to invest? What is your time horizon? What do you want to achieve from your investments? Will you be active or passive (meaning how much time are you willing to spend monitoring your account, adjusting investments, etc.)? For example, my goal was to create a portfolio that would replace my income as soon as possible. I planned to be very active and spend an hour or two every day monitoring and analyzing my portfolio, stock market, and research stocks. This can take you a day or a week to think about your goals and objectives.

 

2. Once you know your goals and objectives, start searching for investment vehicles that meet those goals. Will it be growth stocks, dividend stocks, trading options, or futures? No matter what you find, paper trade it to learn the mechanics of investing/trading. Read about the vehicle you plan to use. Hang on with other investors/traders on social media and ask questions. This is the longest part, which may take months or years. That depends on what you choose to do. If, for example, you want to start building wealth right away, have a long-term horizon, and want to invest with minimal effort now and learn later, you can invest tomorrow. As Warren Buffet said, buy an index, for example, SPY, and invest regularly every month. That will take you one day to start (well, it may be more days because of waiting for your brokerage account to get open). While you are investing in SPY (in our example above), you can spend time learning about other investment vehicles like options, dividend stocks, futures, etc. You will be building your account in the meantime.

 

3. To start investing, you can start with as little as $1 these days. You need to find a broker that will allow you to buy fractional shares of a stock or index and be commission and fees-free (most of them are free today). So, buying stocks or indexes will be easy and with minimal capital. However, if you want to venture into options or futures, you will need at least $2,000 – $5,000 minimum capital (depending on a broker). This also depends on the type of account you open with a broker (cash or margin).

 

4. If I were an inexperienced investor starting my investment path, I would do the following:
    
   • Open a brokerage account.

    

   • Set an automatic deposit of, for example, $100 every month.

    

   • Set an automatic investment of $100 a month to SPY (if the broker allows automatic investing; if not, do it manually every month).

    

   • Let the investing go on autopilot until it grows to larger amounts. If you can afford to invest more, increase your monthly contributions as much as possible.

    

   • Learn about stocks while still auto-investing. Learn about other strategies. Learn about dividend stocks and growth stocks. Learn about options. Paper trade strategies you find, paper trade options, paper trade futures, and learn from it.

    

   • Train your mind to ignore the market’s everyday fluctuations. Subscribe to services that can help you stay informed about the market (for example, my newsletter, LOL). Learn to distinguish between pullbacks, corrections, and bear markets. I am not necessarily a buy-and-hold investor, and I developed a strategy (signals posted in my newsletter) to get out of the market when we see a bear market while ignoring pullbacks or small corrections and going back from cash when we see the end of the bear market. But if you decide to stay invested (buy and hold) all the time, be prepared to stomach large draw-downs (20% – 70% declines during violent bear markets like in 2000–2003, 2007–2009, and 2020; many investors lose money panicking and selling suddenly forgetting that they were “buy and hold” investors).

    

5. Once you learn other strategies, understand them well (know how they make you money as well as how they can lose you money, and if they are losing you money, how you can react, adjust, or repair the trade), paper trade them, you can start using them slowly in your account too.

I know, many dividend investors will disagree with me but I decided to abandon dividend investing in our business account. It was a tough decision and liquidating my dividend portfolio was hard for me – emotionally. But investing should be void of all emotions. You shouldn’t be in love with your stocks or strategy. So why I decided to abandon dividend investing?

The short answer is simple. I make more money trading futures.

I trade options against futures and futures contracts alone and I can trade both sides of the market. If the market is bad and selling, I can trade calls and call spreads. If the market is optimistic, I can trade puts and put spreads. But the biggest benefit of options against futures is that if the trade turns heavily against me, I can just roll it into the opposite trade (like calls into puts, or puts into calls), or roll it higher or lower (strikes) as needed and in many cases still as credit trades and thus for a profit. I can’t do that with stocks.

For example, I invested in Icahn Enterprises (IEP) stock. Then it got attacked by a short seller. Later on the company cut the dividend. The stock crashed more than 50% and never recovered since then. Many of these crashes happen after hours or before regular trading and when the market opens, you are already sitting on a pile of losses. And you can’t do anything about it. Although I could mitigate the losses by trading options around the position, and received plenty of dividends, that position was still under water. All you can do is “ride it through.” But this “riding through” it may take several years and in many occasions, you may never recover.

If you are going to tell me not to invest in questionable high yield “traps”, let me remind you about once dividend aristocrats and kings like AT&T (T), Disney (DIS), Walgreens (WBA), or WYNN… or some times ago, Kinder Morgan (KMI)… or Realty Income (O)… all these stocks were once shining dividend payers… then they crashed, cut the dividend, and many never recovered. Realty Income (O) is down since the end of 2021 and it may take another year or more to get back to the previous all time highs. And what do you get for it? A measle 4% dividend. Not worth it.

In the last week or two when the market crashed, trading options against futures I made more money than in regular bull market.
 

All I had to do is either roll in the money puts into OTM calls, or roll expiration away and lower strikes, and start trading calls. Now, when the market is again optimistic and turning bullish again, I am changing my trading into puts and put spreads. I only have one call strikes trade that got into trouble today and I am rolling it out, away, and partially converting those calls into puts.

For example, here are all the adjustments of a call trade that got in the money thanks to market participants’ idiocy (few days ago they were freaking out about job caused recession, today they are in FOMO):
 

Of course, the trade is not over yet and it will need more work, but I could roll it and improve my chances of ending this trade as a winner despite being busted. What can you do with busted stocks? Nothing. All you can do is hoping that one day (in 10 years), it will get break even. Like this guy who invested $700,000 of his grandmother’s inheritance into a single stock Intel (INTC):
 

That guy is not set for 10 years (could be sooner or later) of waiting to see if his investment recovers. Many times these drops happen after regular trading or at dark pools, and we, the small guys, do not have access to this trading and all we can do is to watch our positions destroyed. I had about 40 stock holdings in my dividend portfolio. And I had stocks that were doing well one season for a few months while other were destroyed and vice versa. Then you have earnings reports. Many times the stocks crash 20% on bad guidance and rarely go up. Some stocks like Netflix (NFLX) can drop huge and recover all during after hours trading (so, again, we cannot participate). Others take years to recover. Investing is not what it used to be – buy a good quality stocks and hold them. Even a good quality stocks can get crushed during earnings season thanks to the Wall Street short-sight. And I decided to be done with this.

Will I trade or invest in any stocks then?

I might, but rarely. I will be buying and selling LETF (leveraged ETFs) based on my market metrics like volatility and sentiment. The gauges I was working on work well to get me in the LETFs during bull markets and out into the safety during bear markets. That will be all I plan on trading. Other than that, I will stay with trading futures.

&nbps;
 

Let’s see how this trading goes from now on. I am trading all sorts of strategies and sending them all to our subscribers and you can pick up the one that works best for you. I trade regular futures, options against futures and now I am adding options against Micro-Futures for weekly income. The benefit of this trading is that it only requires $1,000 starting capital and it can be compounded to larger income.

At the beginning, we will be receiving a small income, only about $30 per week, but we will slowly scale it up. Once we double the amount allocated for this strategy, we will scale up. And we will also slow down based on the market conditions. If the market start flashing trouble, we may even stop trading and move to cash completely or trade bearish strategies instead.

What we will be trading to generate weekly income?

Mostly naked puts. Unlike other instruments, these will require $1,000 buying power. In a bear market, we may go to cash or trade naked calls. In neutral markets, we may go with Strangles.

Why not SPX strategies we traded before like Iron Condors?

The problem with SPX Iron Condors was that if a trade turned against us it was very difficult to adjust that trade. Many times, you have to close it for a loss. Some traders place a stop loss order but in bad market conditions, you can start accumulating losses before you give up and stop trading whatsoever. Micro-Futures allow to trade a naked put for only $1,000 (or less) buying power. SPX naked put would require $80,000+ buying power so you have to trade vertical spreads. Rolling spreads vs. rolling naked puts is a different story.

Here is our weekly income spreadsheet to start with

Here is a spreadsheet, let’s the journey begin. I hope, this will be way better than trading the SPX index (more capital efficient):
 

Good luck everyone!
 
 

Recently, I came across a 1-1-2 options strategy (which is pretty much a ratio strategy). It is a debit strategy, and the explanation of the strategy is below. In this little post I will explain why I do not trade debit options strategies and why you should avoid them too.

Many investors, usually the new ones, who discover options make a huge mistake trading options as if they were stocks. And trading options as stocks never works. It may work for a while, mostly when the markets are bullish, but at some point, the strategy will stop working and losses can quickly pile up. Wallstreetbets reddit is full of people posting their “loss porn” indicating that many have lost all their savings.

So why you want to avoid debit options strategies?

One reason why you do not want to be buying options is time. Options are time sensitive instrument. They have expiration day and if your narrative was wrong, your option contract will expire worthless no matter how great your story was. Add to it that you must be right on the underlying move magnitude (the stock may move in your direction but you still can lose money) and of course, you must nail the direction.

Three aspects impact your option price: direction, time, and magnitude. Be wrong on one of those and you lose money.

The only exception to buying options is when hedging or protecting your other trades, for example when trading defined risk strategies. Otherwise, avoid trading debit options. You will lose money long term.

What is 112 strategy?

The 112 options trading strategy is a variant of the 1-1-1 options strategy, and it involves buying one call option, buying one put option, and selling two puts. Here’s a detailed explanation of how the 112 strategy works and its purpose:

Components of the 112 Strategy:

Buying One Call Option:

This gives the trader the right to buy the underlying asset at a specified strike price before the expiration date.
It provides potential for unlimited upside profit if the price of the underlying asset rises significantly.

Buying One Put Option:

This gives the trader the right to sell the underlying asset at a specified strike price before the expiration date.
It provides protection against downside risk and allows the trader to profit if the underlying asset’s price falls.

Selling Two Put Options:

This obligates the trader to buy the underlying asset at a specified strike price if the buyer of the put options decides to exercise their rights.
The premium received from selling these puts helps to offset the cost of buying the call and put options.
It creates a neutral to slightly bullish bias because the maximum profit occurs if the underlying asset’s price remains above the strike price of the sold puts.

Strategy Purpose:

Income Generation: The premiums collected from selling two put options can generate income to help pay for the cost of buying the call and put options, potentially reducing the overall cost of the strategy.

Hedging: The put option provides a hedge against significant downside moves, while the call option offers unlimited upside potential.

Neutral to Bullish Outlook: This strategy is best suited for traders who have a neutral to slightly bullish outlook on the underlying asset. The strategy benefits if the asset’s price remains stable or increases moderately.

Profit and Loss Scenario:

Max Profit: The maximum profit is achieved if the underlying asset’s price increases significantly, as the call option will gain value, and the sold puts will expire worthless.

Max Loss: The maximum loss occurs if the underlying asset’s price falls below the strike price of the sold puts. The loss is limited to the difference between the strike prices of the bought put and sold puts, minus the premiums received.

Breakeven Points:

There are typically two breakeven points in this strategy:

The upper breakeven point is calculated by adding the net premium received to the strike price of the bought call.
The lower breakeven point is calculated by subtracting the net premium received from the strike price of the sold puts.

Example:

Let’s assume an underlying stock is trading at $100, and a trader sets up the 112 strategy as follows:

Buy one call option with a strike price of $110 for a premium of $2.
Buy one put option with a strike price of $90 for a premium of $3.
Sell two put options with a strike price of $85 for a premium of $1 each.

Net Premium Calculation:

Total premium paid = $2 (call) + $3 (put) = $5.
Total premium received = $1 + $1 (two sold puts) = $2.
Net premium paid = $5 – $2 = $3.

Breakeven Points:

Upper breakeven point = $110 (call strike) + $3 (net premium) = $113.
Lower breakeven point = $85 (sold put strike) – $3 (net premium) = $82.
 

“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”
~Mark Twain