My name is Simrit, and I am a retail trader, contributing analyst for Main Street Trading, and college student. I have been trading both paper money and real money for the past five years and found that my trading style, view on the market, and knowledge base is better suited to trading vanilla options on equities. I primarily focus on what a stock is trading at, rather than why, using volatility, basic fundamental analysis, and technicals to enter and exit trades.
What got you interested in trading?
I experienced first hand the market's whipsaw price action during the financial crisis. My Dad and many of friend's parents working at one of the Big 3 automotive companies were laid off or moved out of state due to the downturn. It showed me the potential impact it can have on everyday life. It was not so much the financial reward of the potential rewards that drew me to the markets, as it was how relevant the financial markets are. This inspired me to learn more about the markets at the young age of 15, and took an investing class the summer after my freshman year of high school at a local college.
The stock market presents a different set of challenges everyday. It kept me on my toes and made me curious as to whether I could trade successfully. I started paper trading in multiple accounts to try and figure out a way to generate profitable returns. I was unsuccessful at first and took additional steps to improve, such as, accounting and math classes at the college level and reading books on fundamental and technical analysis.
Why shorter-term trading?
My belief is that shorter-term trading gives me more number of occurrences to be correct and recover from losses. This also gives me the chance to take a more neutral approach on my trades, without having to take an in depth look at a company's fundamentals.
What do you like and dislike about trading?
I have a love, hate relationship with the volatility skew in the equities market. Currently, the slow creep up in the markets and low volatility is causing investors and traders to price in a low chance of the SPX touching the 2,150 mark within the next couple of months, which makes it hard to justify selling premium right now. However, when the markets tank eventually, the markets will always overprice implied volatility, making it easy justify selling premium.
Having market awareness without listening to the advice of the mainstream financial media has been a challenge. Also, with interest rates bound to return to historical averages within the next decade, trading and investing in fixed income instruments might become interesting.
What do you want to learn?
I want to learn more about implied volatility models used to estimate future volatility (like ARCH/GARCH models), trading the contango and backwardation in VIX futures with spreads and options, trading calendar spreads in energy futures, and market making.
What are you having a difficult time with and what do you think are the mistakes you make?
The great thing about options trading is that when the markets don't go in the direction I am looking for, I can still make a profit. One of the biggest mistakes that I have made since I started trading is not taking modern portfolio theory as seriously as I should. It has only been a couple of months since I have started to integrate beta weighted deltas and minimizing as much risk in my portfolio of stocks and options.
Go over one of the better moments or trades in your experience with the markets:
During the ebola scare in 2014 (a perfect example of irrational trading/investing behavior), I bought some shares in ALSN and made 20% after commissions in less than a month.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.