Interview with Philip Budwick

Hello Coach Phil,

MW: When I first met you online, you were referred to as Coach
Phil.  What type of traders were you coaching and do you still find time
to coach?

Budwick

PB: The nickname came up because I was helping a lot of friends
and other beginner retail traders with the basics of options, as well as
answering questions on more complicated strategies.  So after a few people were thanking me for
the “coaching” I figure I would just use the name Coach Phil as my online log-in
for online discussions or chat rooms.  I
always wished I had access to knowledgeable and experienced traders when I
started with options to avoid a lot of silly mistakes, so I figured I could provide some of my experiences with beginner traders and hopefully help
them move faster up the curve, and avoid those same mistakes.  I still “coach” traders when I can and often
do a lot of one on one chat or messenger sessions with people, if time
permits.  People can always contact me at
pbudwick@gainllc.com
with option trading questions.


MW: Did you love the law and was it difficult to give up the steady income of a
lawyer to become a full time trader?  Are you happy with that decision ?

PB: I always wanted to be
a lawyer for some reason growing up and knew even before college that I was
going to law school.  However, after a
summer internship at a family friend’s brokerage while I was in college, I started
liking the market more and more.  I never
thought of it as a career, just something you can do with your money.  But after a few years working as a lawyer I
became more and more interested in options and started trading and losing money
like all beginners do.  Slowly and slowly
I was becoming more fascinated with options and less with the law and finally
decided to go back to school to get my Masters in Finance.  Once I finished the degree, the law was still
interesting in a general sense but not a profession I wanted to do any
longer.  I was hooked on trading and
worked very hard to put myself into a position where I could quit and not
suffer financially from the loss of that steady income.  I eventually quit the law fully in 2006. 

The key for me was I worked on other areas of
income generation so I would not be 100% dependent on trading income – and
be stressed over every single penny.  I am
not a heavy day trader so I am not chained to my computer day in and day
out.  Trading actually freed me up to
pursue other avenues such as teaching and consulting.  Leaving the law was an easy decision as my
passion was 100% for trading and there was no turning back.

MW: I agree that it’s easy to get the trading bug!

What else do you trade besides options?  Do you have a
preferred strategy, or are you flexible? 

 

PB: I mainly trade options but have gotten the futures bug as
well.  I will trade futures on the
indexes as well as commodities on intra-day swings or sometimes for longer-term
plays.  As for options, I prefer spread
trades and mainly do Butterflies, Calendars, Straddles and other combo
trades.  I will often trade volatility
outright and try to be non-directional using spreads.  Occasionally I will take some pure directional
trades with options when opportunities present themselves.  I do not have one specific strategy which I
apply blindly month in and month out as I believe you have to follow the
markets and adapt to changes in volatility and market behavior.

MW: When you trade for clients, how much detail do they get?  If they want
to know what you are doing for them and why, would you disclose that – or do
you even have the time? 

 

PB: Most clients can see my trades and the positions I have for
them, but I never really discuss the rationale or methodology as that is based
on my own trading strategies and methods and a good magician never reveals
their secrets.  Many arrangements are
usually through a power of attorney so the client retains the funds and account
while I have power to trade the funds. 
Most clients do not care really, as long as they see results and I never
have had a situation where a client demanded to know my methodology.  I try to explain in general terms my approach
and risk management philosophy and that is really all they want to know.

MW: As you can see from the title, this blog is being written primarily for
newcomers to the world of options.  But I do cover many more advanced
topics.  Is there a specific part of your book,
The Option Trader Handbook: Strategies and Trade Adjustments (Wiley Trading)that's most appropriate for option rookies? 

PB: I think the first 2 chapters of my book are the most
appropriate for option rookies.  In those
chapters we describe risk and trade management and specific ways to approach
trading to ensure you are making logical and rational trading decisions.  We also go into great detail on the specific
tools of the trader needed to trade options successfully including the Greeks,
Synthetic Positions and risk/reward profiles. 
We have added a lot of detail in the 2d Edition of the book which we
just finished and should be out in the near future.  Our goal in this edition was to really go
into explicit detail on what the Greeks are and how to use volatility, time
decay and theta to truly understand options and how to make better trading
decisions.

MW: I discuss iron condors more often than any other strategy in this blog.  Do you have
any comments specific to adjusting iron condors – perhaps deciding when to
adjust?  Or perhaps a favored method? 

PB: As you know I was a big trader of Iron Condors for several
years when the VIX was in the 10 – 20 range and did them monthly with very good
success until Aug 2007 when the whole market volatility environment changed
dramatically.  When I did Iron Condors
exclusively from 2003 – 2007 I tried to make strike selections where adjusting
was not something I would have to consider often.  However, as you know markets will
occasionally make large moves and threaten the short strikes.  My experience has been that adjustments for
Iron Condors are quite limited and most either eat into your credit
significantly, or increase risk.
 

The only adjustment I really considered was based on time to
expiration.  One common adjustment “regime”
I would use if the Put side was threatened, for example, was to close the put
spread and roll it down and close the calls and roll them down as well as long
as I still maintained a total net credit. 
The goal was to simply give me more space in the time remaining for my
options to expire worthless or get to a point where I could close for a
profit.  I only considered this though if
time to expiration was short.  If there
was 4 weeks left to expiration then the adjustment would still leave me plenty
of time for the position to move against me while reducing my credit.  However if there was 1-2 weeks and I felt the
market had a good chance of moving back away from my threatened strike then I
would do the adjustment to sort of buy me more cushion to wait out the
market. 

If the market kept coming at me, I would have to accept the
loss and bail.  I found in my experience
that you really only have one adjustment in an IC to give you some cushion, and
if market still will not cooperate then you get out and look for next
opportunity.

Thanks Phil.  I enjoyed this conversation and am pleased to have you as my first interview.

365




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