Interview with Adam Warner of The Daily Options Report

Today it's my privilege to conduct an interview with Adam Warner (agwarner on Twitter).  Adam writes the highly acclaimed and popular blog, The Daily Options Report.

He co-wrote the options
column on Street Insight from spring 2003 to spring 2005, and is
currently Options Editor at Minyanville.com

When not writing, Adam is a proprietary option trader with Addormar Co, Inc.  He graduated John Hopkins University with a degree in Economics. 

Adam's blog is both educational and fun to read.

***

I see
that you have a lot of fun with your blog, Daily Options Report,
including posts on sports, bikinis, and making fun of Lenny Dykstra.  I
like that.  What made you include material of that sort?  How does
your wife feel about the photos?

The Dykstra
photo's? Not a big fan, too much chaw.

The
bikini's? That's probably what you mean.  She tolerates it I guess. I try to not
cross any lines. I honestly don't remember why I started doing it, but at some
point I noticed that if I popped on a chart I could literally hear the
tumbleweed blowing, then if I popped on Melissa Theriau I'd get 20 comments.

Melissa

Then unfortunately I discovered there's a brand of bikini named
"ViX", and they run ads without quite attractive models……

Back to
Lenny. When I started writing him up, he was taken somewhat seriously in the
biz. He had recommendations on TheStreet, was on Fox's "Bulls and
Bears" et. al. But I could see in about 3 paragraph's that it was utter
nonsense. So it just started with pointing out the flaws in his early Deep Call
illogic. Ironically, his actual stock picks were not bad, though we later found
out he was just cribbing picks from Rick Suttmeier and then paper-buying Deep
Calls. And then doubling down if it went against him….and doubling
again…and….you get the picture. His representations became increasingly
fraudulent, so I suppose it's no surprise that his representations about
everything else way beyond options proved fraudulent as well.

It may have begun as fun, but the anti-Lenny campaign was a true public service.



I know
you were a market maker on the Amex.  How long were you there and how did
you get started?  Is this experience in any way related to what you
studied in school?

I started
as an MM on the AMEX in February of 1988, so managed to miss the crash.
Probably a fortunate thing because my first lessons were on the wisdom of
options selling, lol. In August '99, the exchanges started to dually list
everything and poof, there went our spreads [NOTE: The bid/ask spreads narrowed, due to competition]. But it was still the bubble, so it
was still a viable biz for a little while longer. But with tight spreads I just
didn't see the advantage staying in a trading crowd and taking the other side
of order flow. But on the other hand, I really loved the floor. But finally
gave in to reality and left in October 2001 and have traded off-floor ever
since.

I was an economics major at THE Johns Hopkins
University. So just kind of tangentially related to what I studied.

You post
several times per day and are active on Twitter.  Do you have
enough time to do justice to your trading?  Do you watch the markets all
day?

I've kind
of grappled with that. I'm a little ADD-ish, and literally can't stare at a
trading screen for long stretches of time. So I probably don't do justice to my
trading.

The writing kind of goes in spurts, and often off hours, so sometimes
I'll have a bunch of ideas after the close or early evening and then just pop
it out the next day, so maybe I don't write as much during hours as it appears.
The twitter I kind of like as a pseudo floor
experience. Some value-added and some-nonsense of course, but sitting at home
for work all day, it's a bit of a lifeline sometimes. I thought twitter was
kind of pointless at first, now I wouldn't want to be without it during the
work day.


I see that
your first book is about to be published by McGraw Hill and is titled:

Options Volatility Trading: Strategies for Profiting from Market Swings.
That must feel good.  Congratulations.

From Minyanville: "Options
Volatility Trading
educates novice to intermediate investors on the
nuances of the volatility index (VIX), the psychology behind it, and the best
strategies to employ during dramatic market shifts. It provides a solid
grounding in historical volatility patterns, distortions created by market
noise, and how to use tools other than VIX."

Do you have any pre-publication tidbits to share with the readers of Options
for Rookies? 


Well, as a measure of how great I find your site,
I've done this for 21+ years now and I still learn things reading info for
"Rookies". My book is a bit of compliment to the material you cover.
It's maybe "Options for Intermediates". I assume a basic knowledge of
options and options Greeks (although I do have a chapter on Greeks). Much is
similar to your material though, I discuss position management, different
strategies, et. al. A rather unpublicized area imho was the natural ebbs and flows
of the expiration cycle. So perhaps of interest are a few chapters on timing
certain types of options trades within the expiration cycle.

What gave you the idea to begin writing a blog, and when was that?

It
was really just a whim. I was writing for StreetInsight (which I believe now is
called Real Money Silver). I enjoyed it and liked all the people there, but it
was a bit of an expensive service and I kind of felt like I was writing in a
vacuum. It was 2005 I believe and blogs were just getting popular, so I figured
I'd give it a try. I emailed the random few I knew read me over on SI, and my
actual "break" came with a link from Charles Kirk (The Kirk Report) who at the time
was THE name in biz blogs. Still is probably. We've had contact over the years
and I'd also add he's about as nice as they get.
[MW: I confirm that The Kirk Report is a well-done, influential blog]

Do you have a favorite option strategy that you consider to be your 'bread and butter.' or do you stay flexible and trade based on market conditions?

I try to
stay flexible. In general I prefer selling options to buying, but reading you
and Condor Options and others, I tend to spread them and keep the risk
contained that way. I may end up with an Iron Condor, but I often leg it by
selling the put spread first and then sometimes leaving it at just that, or
sometimes legging a call spread short later.

There's much more to talk about, but that's more than enough for today.  Thanks Adam.

Adam's book

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2 Responses to Interview with Adam Warner of The Daily Options Report

  1. Brad Castro 09/29/2009 at 11:11 AM #

    Great interview – I’m a big fan of both of you . . .

  2. Mark Wolfinger 09/29/2009 at 11:30 AM #

    Thanks Brad