A little bit of trader transparency

While plenty of trading gurus and twitter traders like to talk about how transparent they are, most say little about themselves or their trades. Many go by aliases, many post their trades only after they have supposedly made them, or put their trades up on their website, pretending that by posting a trade on their own website with no third-party verification it somehow proves they made the trade. Screw them all! I have nothing to hide so I am posting below details from my past tax returns. Furthermore, I have directly imported all my past trades (where that was possible) to Profit.ly. I went back and hand-entered trades from accounts I could no longer auto-import from. See my trades on Profit.ly here. This listing of my trades is not guaranteed to be correct — I am sure that there are small mistakes in trades I hand-entered and auto-importing of trades appears to have missed a few trades. That being said, my record on Profit.ly is an honest accounting of my trades and is very close to the gains that I have reported to the IRS.

Besides the trades that I have posted on Profit.ly, I thought I could provide a bit more information on my trading gains. From 2007 until January 1, 2011, my trades on Profit.ly show $497,167 in profit. For the tax years 2007 to 2010 I reported to the IRS $510,553 in gross trading profit (this excludes long-term capital gains and expenses other than commissions). See below for details.

2007
I do not have electronic copies of my tax returns from this year.
Long-term capital gains: $12,386
Dividends: $4,857
Gross trading profits (short term capital gains on Schedule D): $58,697

I did not have enough trading activity to file as a business trader in 2007 so most of my (modest) trading expenses were not deductible.

The vast majority of my trading in 2007 was in my individual Interactive Brokers account, since closed. See the 59-page PDF activity statement showing all my 2007 activity.

2008

Schedule D long-term gains: $5,030
Schedule D short-term gains: $203,726
Add back trading gains transferred to Schedule C: $31,451
Add back loss on private company LLC investment: $18,633
Gross trading profits: $253,810
Trading expenses: $31,451
Net trading profits: $222,359

Starting in 2008 I began filing as a business trader, which allowed me to deduct trading-related expenses. Because of the special tax treatment that business traders receive (deductible expenses but no self-employment tax) my accounting firm transfers as much income from Schedule D to Schedule C as is necessary to zero out the trading expenses.

Almost half of my trading expenses, $14,189, were due to interest (almost all of which was a loan from a family member for funds I used for trading). Getting a sit-to-stand desk and four touchscreen computer monitors accounted for another good chunk of expenses and I paid Tim Sykes a bunch of money in 2008 too.

The vast majority of my trading activity up until May took place in my individual IB account, since closed. See all my 2008 activity in this account. I opened a new account (that I currently use) at IB that was my primary trading account for the rest of the year.

Goldman Sachs trade report
Image cut from tax return Schedule D
Image cut from tax return Schedule D continuation sheet
Image cut from tax return Schedule C

2009

Schedule D short-term gains: $84,992
Add back trading gains transferred to Schedule C: $15,178
Add back short-term losses on Prosper.com loans: $201
Gross trading profits: $100,371
Trading expenses: $15,178
Net trading profit: $85,193

Again, approximately half my trading expenses were due to interest, most of which was from a loan from a family member to fund my trading accounts.

Image cut from tax return Schedule D
Image cut from tax return Schedule D continuation sheet
Image cut from Schedule C
Goldman Sachs trade report

2010
In 2010 I elected to become a mark-to-market trader; consequently my trading gains are now filed on Form 4797, not Schedule D.
Form 4797 gross trading gains: $87,871
Subtract gain on Section 197 expensed trading DVD: $156
Add back trading gains transferred to Schedule C: $3,680
Add Broadstreet trading gains: $6,280
Gross trading profits: $97,675
Trading expenses: $9,960
Net trading profit: $87,715

Image cut from 4797
Image cut from detailed statement of gains
Image cut from Schedule C for trading business
Image of other (prop firm) trading income

Lightspeed trade activity (Account opened and closed in 2010)
Broadstreet trade report (Account opened and closed in 2010)

2011
I have not received 1099 forms yet. Preliminary data downloaded from my brokers and analyzed by Tradelog is provided below but it has not been verified / double checked.

Interactive Brokers: $67,823 gross profit (net of $10,094 in commissions; $2,901,330 in sales and $2,833,507 in purchases)
SpeedTrader:  $86,212 gross profit (net of $13,153 in commissions; $4,120,830 in sales and $4,037,953 in purchases)
Capstone: $196 gross profit (net of $142 in commissions; $12,797 in sales and $12,601 in purchases)
Gross profit $154,231

I will update this post after I have received my 1099 forms.

Disclosure: I remain a satisfied client of Interactive Brokers and Capstone. I am no longer a client of any other broker or proprietary trading firm mentioned. I have an ongoing business relationship with Tim Sykes that is explained in my terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

8 thoughts on “A little bit of trader transparency”

  1. Nice post Michael. I’m curious how you think your trading has evolved since those earlier days of ’07-’09 and what has changed the most in your trading? Obviously your equity curve is much smoother.

    I see you had some nice trades with some big profits you took off in early ’08 after holding for a number of months. Do you feel there was greater opportunity at that time or do you feel that you were taking on much more risk?

    -Bruce

    1. Bruce,

      The main thing that has changed over time is my trading position sizes have decreased and my holding period has decreased. In 2007 up until May 2008 I primarily just shorted and held. The increasing frequency of forced-buy-ins (with MXFD in particular, dealing me a near-six-figure loss) and my exposure to Tim Sykes made me into a day-trader who rarely held more than a couple days. While holding long-term shorts of pumps can work the risk is much greater now than in 2007 (largely resulting from increased SEC scrutiny following Lehman Brothers’ failure).

      Most of my volatility from June 2008 until the end of 2009 came from my ‘super secret trading strategy’ that I outlined in my talk in Las Vegas last year. I still use that strategy but I have drastically reduced position sizes (my large loss on TRK in early 2009 for example came from an almost $500k put option position that I day-traded).

  2. Very impressive dude. I still think it’s kool that you were able to identify a profitable strategy your first year of trading, even though your risk were higher, you were still able to notoce patterns and profit from them and nicely I might add.

    Thanks for posting and hopefully it’s one more step towards a pay site, which you clearly deserve.

    Looking forward to Goodeasy-Trading & Profitable-Alerts.

    1. Well I did just finish a blog post offering Lifetime subscriptions to my alerts … just a couple kinks to work out so 98% chance it will happen within two months.

  3. Hi, Michael!

    I just wanted to leave you some lines.

    I really like what you made here. I watched almost every video and read almost every post and really like your style of writing.

    And congrats to your QCOR trade recently! Could you maybe just give some thoughts on it?

    Thanks for your work!

    Regards

    1. My position size was too large and I covered too soon, in response to the Street Sweeper article alert (actual article not yet out). I discuss in details this trading strategy in some videos in my upcoming subscription service.

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