What Do Seasoned Options Traders Think of RadioActive Trading?

In this post, comments and wisdom I got from an experienced options trader about married puts, risk management, and trading in general.

Hi gang! I recently got off the phone with a local (MY state) options trading enthusiast. All over the Denver and Colorado Springs areas there are groups that offer support to users of VectorVest, OptionVue, and other firms dedicated to teaching the public about trading options, then selling them the tools to do it. (I personally prefer a cheaper and better alternative at http://www.poweropt.com/RAT/ )

Anyway, some of these local groups look for guest speakers at their events. When a friend of a friend suggested that I talk with a local, veteran options trader… Dennis… I left a message on his phone a couple of weeks ago, then forgot about it.

Dennis is a busy man, like most successful people are. So I didn’t expect a return call any time soon, if ever. But he did follow up. Yesterday Dennis gave me a ring to check out what I might say to his group in case he did invite me to come. In response, I invited him to check out my twice-weekly webinar, The RadioActive Trading Methodology.

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If you’ve never been, here’s a summary: Twice a week I teach (for free) the RadioActive Profit Machine… a very specific arrangement of stock plus a far-out-in-time, in-the-money put option… as well as one or two of a number TEN “Income Methods”. The IMs are my name for adjustments to a married put trade. These adjustments mostly spread trades, nested WITHIN the framework of the married put. These adjustments are designed for taking money out of a married put (without selling the stock) or lowering risk, or both.

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After watching the webinar Dennis was quite impressed. He said, “WHERE IN HECK WERE YOU LAST WEEK??”

During the webinar, I had shown a comparison between covered calls and married puts, as well as one of the several ways to take money out of a “bulletproof” stock without putting a limit on the upside. Coincidentally, Dennis had just that same week been let down, in BOTH of the ways that a covered call trade can let you down.

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Dennis had been trading covered calls on two BioTechnology firms. He got hammered by one when it gapped down… and to add insult to injury… he didn’t realize anywhere near the gains he might have when the other stock he was playing went waaaaaaay up.

That biotechnology, by the way, was ITMN… up about 140% since this time (March 11, 2010) last week. Dennis had sold an in the money covered call. Awww, man. Yes, Dennis DID make a little bit of bank when he got assigned… but not nearly what might have been, had he only put on a married put instead of a covered call. On the other hand, one of RadioActive Trading’s clients (“Bill”) was long 1000 shares of ITMN with ten puts for protection, keeping his risk manageable and small while playing for big gains…

Hmmm. Who do you think was happier after ITMN blew up? The guy with short calls against… or the fella that went in to the FDA approval announcement having a great night’s sleep with a tiny amount AT RISK, and blue skies for the stock’s meteoric climb? Give ya three guesses and the first two don’t count, my Dad used to say.

Being an experienced spread trader, Dennis could see the benefits of RadioActive Trading immediately during the webinar. He really did mean it when he said he should have seen my presentation a week before. Well, Dennis is now purty excited to have me come and talk to the local options trading group. That’s something I really enjoy doing on a limited basis, and I’m happy to share. It seems every time I do, I get to rub shoulders with guys smarter than me and I get to learn a thing or two as well. I know I’ll learn a thing or two from Dennis!

I’m looking forward to this upcoming speaking engagement with seasoned investors as well as newbies. Dennis and I had some good laughs on the phone about how some folks take an Optionetics class, or go to a weekend Rich Dad seminar… and come out on the other end with $5K in capital to trade and ready to quit their day job.

Hmm. Not gonna happen, folks. But what you can do, right now… is learn to develop a positive expectancy system for your trading, stick to a set of rules… and above ALL, use options to MANAGE your RISK in a trade.

Dennis is no slouch at trading. He regaled me with the story of how he turned a stake of $300K into $1.6 MILLION in just about a YEAR…

…but also, how he ended up LOSING $1.1 million of that in a matter of a few DAYS.

I was thinking to myself, “Well… still. That’s $300K to $500K in about a year. Still pretty good.” But Dennis pointed out to me that he had been so highly leveraged that he was lucky to get out with a net gain in that time. He jokingly… or perhaps not so jokingly… told me that he was just a step from sleeping under a bridge at one time. The margin that Dennis was using exposed him to losses around $4 million, had things gone further south. Good thing that this little adventure of his happened years ago instead of during October/November 2008, eh? 😉

Yes, big risks can make for big gains. But they can also allow for some spectacularly crushing LOSSES. Dennis is one of the few that grasp this and had the nerve and the smarts to stay in the game, but with more conservative trading. As the saying goes, “There are bold traders and old traders. But there are NO old, bold traders.”


After this, Dennis and I talked about how most options trading education out there is simply about the mechanics of a play, and almost NONE of it is about the things that really matter. We talked about expectancy, psychology, position sizing, a written trading plan… the really important components of a complete system.

After taking a look at the real trades I’ve done with the RadioActive Trading Methodology… but more importantly, the PRINCIPLES that it’s based on… Dennis told me that using a married put is one of the smartest things you can do because it predefines your risk, yet leaves your upside open… and then you can do trades nested within the already protected trade. Like the RISK-LESS bear call spread that I demonstrated in that particular session.

A half hour after beginning my follow-up phone call with Dennis, I hung up the phone… simultaneously humbled and encouraged. When a man that rolls $300K into $1.6 million tells you that the way that YOU’RE trading is pure gold… that’s something. Now, I still have quite a ways to go because I’m constantly working on my systems and on myself to become the best trader that I can be. I know that when I meet with Dennis and his group, I’ll have a bunch of questions about market psychology and other things that I need a better grasp of.

Dennis has said that he will be “an open book” and share anything that he can with me, as he does for the members of his little options trading group in Colorado Springs. Since he’s achieved an honorable level of success as a trader, I’m going to definitely take advantage of that offer. I hope to have the caliber of character and accomplishment that Dennis has had during his career. In the meantime, I am happy and humbled to have something to offer in return.

About Kurt Frankenberg

Kurt Frankenberg is an author and speaker about entrepreneurship, martial arts, and trading the stock and options markets. One of several "Biznesses" he founded as a teen, The Freedom School of Martial Arts, has been in continuous operation since 1986. Kurt lives in Colorado Springs with his wife Sabrina, German Shepherd Jovi, and his ninja cat Tabi.