Karen the Supertrader has become a source of both inspiration and curiosity to many in the

investment world. Her three interviews on the tastytrade Network have captivated over a
million viewers, many of whom are fascinated by the options trader and philanthropists story,
strategy, and overall attitude towards managing her money.
KAREN THE SIMPLE TRADER - History
Before Karen became Karen The Supertrader, she was a CFO for a small company. She was
considering opening a bagel shop with a friend, then was invited to attend an options trading
seminar. In 2002, she decided to invest the money in an options training class and started
trading with $10,000 USD. The rest is history.
Initially, with her accounting background, Karen analyzed the fundamentals of public
corporations for her investment decisions. However, over the next 5 years she abandoned
fundamental analysis and dove into technical analysis. She began studying charts and trying
several different types of options trading strategies while continuing to work her day job as a
CFO.
In 2007, Karen resigned from her company and decided to begin trading options full-time.
She decided to transfer $100,000 into a brokerage account at thinkorswim from a savings
account managed at Merrill Lynch, which retuned her hardly any money over ten years.
Karen started appreciating the quantitative analysis that the thinkorswim platform offered and
started incorporating the statistical probabilities into her investment strategies. In her first
year after doing so, she made $50,000 in profits using options strategies such as Iron
Condors and Credit Spreads.
In 2008, Karen migrated from trading options in individual stocks to trading indices, but
always selling premium. Her motto became, Once I collect premium, I dont want to give
that money back.
KAREN THE SUPERTRADER - Strategies
Karens main trading strategies focus strictly on selling premium and using Bollinger Bands to
view the standard deviations in a graphical form, preferring to put on trades outside of two
standard deviations to current prices. She used to trade as many as 30 stocks at a time, but
was continuously burned by the earnings announcements of the public companies she held
in her portfolio. Karen revised her strategy to focus on selling wide Index strangles in SPX,
RUT and NDX.
Today, she mainly trades the S&P 500 Index (SPX), which in addition to tax advantages has
commission optimization, liquidity, and size, as opposed to SPY, which she says is too
expensive for her to trade cost effectively.
Karen sells contracts at 56 DTE (Days To Expiration) and keeps the trade on for a few weeks,
or sometimes, just a few days. She then takes the front month off and sells the back month,
again at approximately 56 DTE. Around 40 days, if the options seem safe, she leaves the front
month on, but more often than not she takes off her initial position 10 to 25 days later. For
example, by October 30th she closes out of most of her November positions and already has
positions open in December.
When volatility is high, Karen The Supertrader constantly trades, selling and collecting
premium. If volatility is low, she often lets her front month positions expire worthless. For her,
good volatility is when the VIX is between 18 and 20.
Karen also ladders out positions opening positions at different expirations, and always
trying to sell Calls and Puts 95% OTM (Out of The Money) or two Standard Deviations away.
RISK MANAGEMENT
Karen The Supertrader always looks at the market as if it has already fallen 100 to 200 points,
and then subtracts 12% more from that.
For example, if the SPX was $1,450, Karen may subtract 100 points to $1,350 then multiplies
that by 0.88 (12%), giving her a price of $1,188. Karen would then actively trade in that area.
Karen does sell Calls, though much less often than she sells Puts. She also legs into each side
of the market rather than placing trades as strangles. As a contrarian in her trading style,
Karen sells Calls on up moves and Puts on down moves. Most often Karen the Supertrader
sells more Puts than Calls.
Another risk metric Karen The Supertrader uses is the analyze tab on the thinkorswim
platform, utilizing the parameters of 10% up and 12% down to see how her net liquidation
would look if the market were to move in either of those directions. Karens goal is to prevent
her trades from going ITM (In The Money). If a position moves close to 30% ITM (In The
Money) she makes an adjustment by moving her positions up or down when the underlying
hits that level. She might sell more options on the untested side to cover the cost of moving
the position, but she also looks at the time left on the option to make decisions on whether
to close or roll a trade. Karen rarely leaves open positions in front month options but may do
so if they are nearly worthless.
Karen commits around 50% of her capital, though sometimes she will go as high as a 70%
capital commitment, but prefers to remain at around 50% in case she needs to move
positions up or down. Karen never uses stop losses because she and her team watch the
markets at all times.
In 2013, Karen claimed she did not have a losing month, nor did she have to roll out her front
month positions to the next month. She used between 1 - 1 Standard Deviation to open
positions rather than a 2 Standard Deviation. As for a time frame, she sells Monthly Puts and
Weekly Calls, two weeks out, trading closer to ATM than she has in past years.