Meet Dino Karahalios
Home/Office location: Wauconda, Illinois
Years trading: 16
How did you start trading?
I attended a presentation by Tom Sosnoff, who was then CEO of thinkorswim. He spent a very generous amount of time answering individual questions and sharing his trading knowledge. I was ready to take more control of our savings from a broker, so I moved money to thinkorswim and started learning to trade for myself.
Favorite trading strategy for what you trade most?
Delta neutral trading with calendars or unbalanced (broken wing) butterflies, depending on where volatility (VIX) is relative to a 30-day range. If volatility is below its mean, then I like putting on index and ETF calendars of various durations. When volatility is above its relative range, I like unbalanced butterflies. When VIX is around its range, I do both. I like to keep the trades as delta neutral as possible with adjustments and watch the theta grow as both premium decay (theta) and volatility (vega) work in my favor.
Average number of trades per day?
What percentage of your outcomes do you attribute to luck?
This is tough to answer because my goal as a delta neutral trader is to take luck and emotion out of my trading by maintaining good mechanics. I focus on planning my trades and using my mechanics to keep my deltas and other Greeks in line with my profit targets. This way, I can trade the trade, instead of the market. My market awareness mechanics include identifying support and resistance areas where adjustments would be necessary, so I’m prepared to just execute those mechanics. When the market arrives there, I execute my plan. At least 70% of my trades are profitable using this method.
Favorite trading moment?
I’ve had many favorite trading moments over the years, but my absolute favorite ones come at the end of the months where I’ve made my monthly target. I have a plan. I make sure to maintain good mechanics because it’s the surest way to meet your plan. I learned that from watching Tony Battista on tastytrade. It was a new year, and Tony’s losses were piling up after the first few weeks of trading. He confessed on the air that he needed to review his mechanics and make sure he was following them rather than his emotions. I was off to a bad start too that year. But Tony’s words led me to reevaluate my mechanics and “repair” them. It worked! Following my mechanics helps me keep my emotions out of trading and that leads to more success.
Worst trading moment?
Luckily, my worst trading moment turned into one of my best. In August 2015, I experienced the real power of volatility for the first time. I opened an SPX Index calendar on Aug. 19, after the market had dropped 25 points and regained about half its losses. Volatility was still relatively low, so it made sense to me. The next two days, the SPX dropped another 90 points. Thirty on Thursday. Sixty on Friday. That’s when I finally tried to adjust by rolling my calendar. The market was moving too fast for the order to fill. So, I did the only thing I could to flatten my deltas— I bought puts, twice that day at different strikes. Monday, I was in a panic when I woke up to find the futures dropped 90 points on Sunday night, and the futures were in lock limit.
I couldn’t hedge! It was going to be a disaster! But to my surprise my P&L [profit and loss] was positive when the market opened. The two puts I bought, complaining all the way, were eight times the price I paid for them. They cancelled out the losses from the short puts—and then some. Eventually, I sold the original calendar, after the market had settled and rallied into the close. I made my best profit to date on that day and learned the real power of volatility without needing emergency surgery.
Favorite Trading Book
The Most Important Thing Illuminated By Howard Marks
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