Joe Kunkle – Option Trader Interview Series

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by Gavin in Blog, Trader Interviews
October 17, 2013 0 comments

Joe Kunkle is the founder of and Operation Earnings. He previously managed Institutional accounts, but currently is trading his own accounts and focusing on the OptionsHawk business.

Joe graduated Bentley University in 2005 with a bachelor’s degree in finance and graduated from Boston University in 2007 with a master’s degree in investment management.

He has previously worked as an Equity Analyst for Thomson-Reuters on a new venture at Thomson Squawk-Box. He provided a wide array of live market analysis which includes but is not limited to swing trades, long-term trades, monitoring of the options market, option trading strategies, sector analysis, conference call coverage, earnings previews, trading tools, intraday trades, and other trading strategies.

Joe has been trading for 15 years and has studied a variety of trading techniques and strategies. He combines many different trading philosophies as well as technical analysis, fundamental analysis, and macro-economic analysis into every trade. He mostly trade options and implements complex option strategies to take advantage of favorable risk-reward set-ups.

Joe aims to make large % gains in options trading based on news driven and technical analysis driven trades that allow him to take advantage of moves in implied volatility. He tracks the options market and uses unusual activity as a signal to follow the trade if it makes sense to him and there seems to be a story behind the action.

Let’s hear some more from Joe:

When did you first get started in the trading business?

I’ve been trading since I was 15 years old, but it became my career in 2009 after working in the Investment industry building capital, and completing my Master’s in Investment Management.

Can you remember your very first trade?

When I was a kid I would trade for my parents account and it was the time when Technology stocks started parabolic moves.  Micro-Strategy (MSTR) and Western Digital (WDC) were the first two stocks I bought and both more than quadrupled.

When did you first realize that you could become a full time trader? What gave you the confidence to take that step?

After having the proper schooling on risk management, creating a trading plan with short and long-term goals, and after building up enough capital to where the percentage returns from trading were better than working a “normal” job.  I’ve never lacked confidence in anything I’ve done.  Confidence is about preparation and hard work, so anyone willing to put in the time and work can realize their dreams no matter what industry we are discussing.

A lot of people want to become full time traders, how much base capital is needed to trade for a living?

It depends on the type of lifestyle you want to live.  A trader that wants to live a life of luxury right away clearly will need a larger base capital position, but a patient trader can realize the power of compounding and grow capital quickly.  A rough number would be $400,000.  The S&P historically gains 10.4% on average and a seasoned trader should return no less than 25%/year, which translates to $100,000 in profits in year 1, which is more than enough for a single person to live comfortably.  The situation is different for each person, and each individual should crunch the numbers and have this as part of the plan before jumping into a trading career.

What psychological challenges are involved with trading full time?

It’s all about discipline and not allowing yourself to be distracted.  It is also important not to allow a bad trading day interfere with your mood that causes issues in your personal life.  The stress of making a living is difficult for many to overcome, but in the end you need to understand that money is very low on the totem pole in terms of important things in life.  A bad attitude will be reflected in your trading results, so it is best to keep a positive view and do not trade angry, tired, or sick.  Set strict daily and weekly loss limits and do not violate your trading rules and stick to your trading plan.

As a traders’ account size grows, small percentage movements suddenly have a large dollar impact. All of a sudden a 5% loss is the equivalent of buying a new car. How did you manage this transition?

If you keep allocation levels, stop-loss levels, and use a Value-at-Risk (VaR) model this should not be an issue.

What did your trading education entail?  Did you have a mentor that guided you in your trading?  If so who was it, and how influential were they?

My background included a Bachelor’s of Science in Finance and a Master’s of Science in Investment Management.  I did not have a mentor and am self-taught.  I have read dozens of trading books and into each one try to just pull out a few good nuggets of information to add to a journal.  Paper-Trading is effective for a trader looking to transition to full-time, allowing you to test your process and show proven results.  The Internet is full of great resources and now with Social Media sites such as StockTwits you can meet a lot of very smart people in the industry and continue your learning process.

What is the most important trait of successful traders?

Much like an NFL Quarterback it is very important for a trader to have a short-memory, in terms of not allowing your last trade to either have you over-confident or trading timid, and you are only as good as your next trade, so start each day and each trade with a clean slate.

What is your number #1 trading rule?

Know the difference between a stock and a Company.  There are many great companies with poorly acting stocks and vice versa.  Pay attention to the price-action and the volume variations leading a move’s direction, and let the tape determine if you should be long or short a given stock.  Remember, you may have a great idea but you need the Institutional money to support a strong move higher because in the end a stock price comes down to the supply/demand balance.

How would you describe your trading style?

I am an active trader that combines fundamentals, technicals, and options flow analysis to find the best long/short ideas.  I trader both underlying equities and use simple and complex option strategies and like to trade events.  I do not have a limited number of stocks I focus on although many prefer that style, but I scan the entire universe of around 3,000 stocks with liquidity weekly and am willing to trade any stock if I like the fundamentals and chart.

What analytical tools do you use in your trading?

I use Prophet Charts within the ThinkorSwim trading platform for charting and use basic indicators like MACD, RSI and ADX, but prefer to trade price-patterns such as flags, trend-line breaks, and utilize Fibonacci Levels and Moving Averages for targets/stops.  The use FinViz for easy access to fundamental data and when researching prefer to go to Company’s Investor Relation sites and read recent Conference Presentations and Earnings Reports to better understand the company and the outlook.  I set price-alerts all the time at key resistance/support levels to be able to quickly act on stock moves.  I have created many valuable Analytical resources at OptionsHawk that are my main focus for idea generation when creating option strategies.

Can you share your trading results for the last few years? How did you fare during the financial crisis?

The OptionsHawk portfolio returned 38.65% in 2012 and 44.08% in 2011 with 67.9% and 63.6% winning trades respectively.  The Financial Crisis was a great time to be an option trader due to the heightened volatility, and also the resultant opportunities that came from the crisis with many high-quality stocks trading at insane discounts for the longer term investor willing to build a position.  Also, as a trader that follows Institutional options flow, during the crisis there was large put-buying in the Bank stocks well-ahead of the market sell-off and being able to piggy-back those trades paid off substantially.

Are you willing to share your worst trading experience?  What happened and how big was the loss?

Naked put-sales come with significant risk, but is a strategy I like to use when I feel a sharp move lower and resultant spike in volatility is not deserved considering the fundamental outlook.  In April 2012 Tempur Pedic (TPX) sold off on earnings and I pulled the trigger too fast with an opening put sale (cash-secured to manage risk), but ended up buying back the puts to close a few months later at around 8X the credit.  It was a lesson that will stick with me, as soon as a momentum stock gaps down and loses long term trend support it is not worth stepping in front of.

How long have you been running Options Hawk?

I started OptionsHawk in 2009 and have been expanding the subscription products constantly and now have what I consider to be the best full-service live trading room for advanced equity and option traders.

Any big plans for Options Hawk in 2014?

I recently launched a site,, that focused on trading earnings with option strategies and the methodology of approaching an earnings release with a full 360 degree preview into the event.  I am always creating new resources for clients at Options Hawk and look forward to another year of innovation and potentially new product offerings.  If I had the web design and programming background I could create some amazing products for traders because I have the plans laid out, so I will likely look into partnerships in 2014.

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Options Trading 101 - The Ultimate Beginners Guide To Options

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