Optionetics.com
INTERVIEW CENTRAL: John Netto, Part I
Friday September 14, 7:30 pm ET
By Jeff Neal
John Netto is an experienced trader as well as the author of the book One Shot, One Kill. Prior to John starting his trading career he spent time in the Marines, to which he attributes much of his trading discipline. John also educates traders on just how to implement his trading methodology.
I really enjoyed speaking with veteran trader John Netto. This is the first part of that conversation.
Optionetics: How did you first become interested in trading the markets?
John: I first became interested in trading the markets while watching the movie Wall Street when I was 11 years old. The combination of money, risk, adrenaline, and cerebral gymnastics had me hooked at an early age. The implementation of a trading system was the byproduct of years of knowledge and an understanding that having a bona fide methodology was critical to being successful at trading.
Optionetics: Do you ever use options and if so what are your favorite strategies?
John: I love using options and think the question of what my favorite strategies are is more indicative of what kind of market we are trading in. I love buying and selling options, implementing strategies for range-bound and trending markets. Options really allow my creative juices to flow as a trader because they match my personality in being able to help me define risk. This allows me to function more objectively as a trader in the heat of the battle.
Optionetics: What are the things you like best about the trading business?
John: I like the trading business from the perspective of evolution. The change that has taken place in the markets over the last five years is incredible. The alternative investments space is very exciting right now as a number of products that were once not available have become much more accessible. As a result, back testing for markets 20 years ago when things like overnight trading and continuous nature of the markets wasn’t as prevalent. This is key as a systems developer as risk management and draw downs are a critical component to the efficacy of a system.
Optionetics: How do you treat losses and how to go about establishing their risk tolerance before the trade is entered?
John: I treat losses as a component of doing business in a long term rising equity curve that will experience highs followed by pullbacks. This type of price dynamic defines the market and defines us as traders. I establish risk tolerance on trades using several components, to include but not limited to: strength of trade, other portfolio positions, correlation to portfolio positions, possible strategies to hedge at certain price targets, risk-to-reward ratio, as well as exit price.
Optionetics: Are your trading systems geared more toward long-term strategies or short-term strategies?
John: I have systems and styles geared at both. The recent market action (July and August) has necessitated a shorter-term strategy as the overnight volatility has been extreme. Volatility like the market oscillates and creates the opportunity to adjust our styles and strategies accordingly.
Optionetics: Thanks, John, for sharing your trading approach with our Optionetics reading audience.
Jeff Neal
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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