Listen to the audio version of this article (generated by AI).
This week, I was interviewed on an episode of TradeSmith Unfiltered… and it was such an important talk that I got permission to unlock it for my Market Minute readers.
Adam Johnson – former Bloomberg anchor and founder of the American Ingenuity portfolio – and I discussed the markets, why so many people are turning to gambling, the strategies I see working for us the rest of the year…
And of course, my 12 Trades to $1 Million challenge… how it’s going, why I opened it back up due to popular request, and why I’m so happy to teach regular people how to use options the right way, so everyday folks have their shot at the American dream.
Watch the unlocked episode here, or scroll down to read the transcript.
Transcript
Adam: Welcome to TradeSmith Unfiltered. I’m your host, Adam Johnson, former Bloomberg anchor and founder of the American Ingenuity portfolio.
This week, we speak with options trader Jeff Clark, who has challenged himself to turn $5,000 into $1 million with just 12 trades.
You think it’s impossible? I want to know more.
Jeff, your million-dollar challenge has turned a lot of heads. How’d you come up with the idea?
Jeff: Well, I have to tell you, it’s not something that I would normally preach. I’m a conservative trader. I tend not to take big bets, and I take high-probability bets.
But we were at a conference several months ago, and part of the meetings at the conference, we were talking about this proliferation of gambling that’s happened with the prediction markets and even with zero-days-to-expiration options.
You can see it in the stock market. You see gambling pretty much taking over everywhere.
And the psychology behind that was there’s a lot of folks who are desperate, a lot of folks who look out there and think, I’ll never be able to afford a house. I’ll never be able to accomplish the American dream without taking big swings.
And so that’s why a lot of young folks, and frankly, a lot of 35-, 40-, 45-year-old folks, are also getting into the whole gambling phase.
And I thought, well, rather than gambling, maybe it would make more sense if we actually educate folks on the right way to trade, to trade using options effectively, the way that I’ve been using them for nearly 40 years now – or over 40 years, actually – and educate folks along those lines.
And maybe the way to do that is to show them that it is possible, with the right strategy and the right discipline, to take something as small as $5,000 and turn it into $1 million.
So one of the folks on my team, she went back through my track record and said, you know, there are three times in the history of your franchise where you have taken $5,000, and if you rolled it each time into successive new trades, would have generated $1 million in 12 trades or less.
Adam: You’ve already done this before.
Jeff: Well, I haven’t marketed it that way, and I certainly haven’t preached it that way.
But it would have been possible if you started with $5,000 and put it into one trade, and then just consecutively rolled those positions forward into the next 11 trades, where you would have taken $5,000 and turned it into $1 million or more.
Again, I didn’t market it that way. I certainly didn’t preach it.
So this is the first time that I’d come out there and said, “Hey, this is what we’re going to try to do.”
And I decided to try to do it because the market environment is such where we have enough volatility and we have enough opportunities present to where it is possible.
But again, you have to have the right strategy, and you have to have the right discipline.
Now, part of that is you have to be willing to cut your losses.
It doesn’t mean you’re going to make money on all 12 of those trades.
But when a condition exists where you’re going to lose money, or it looks like you’re losing money, you’re able to cut the loss in half, so you’re never out of the game.
That’s sort of the most important thing about this.
If you put $5,000 in and it doubles, it goes to 10. Then you put 10 in and it doubles, it goes to 20. You put 20 in, and all of a sudden this is where you’re going to take the loss. It gets cut in half. You cut that loss at 50%.
Then you still have funds to go into the next trade. And so technically, you’re never down to zero. As long as you’re still in the game, you still have that opportunity.
Adam: Yeah. Understood.
So are we talking about a strategy where there’s only one position at any one time? Or could you conceivably have two or maybe three of your 12 trades happening simultaneously?
Jeff: No, it’s strictly one position at a time.
So we play that position out. As soon as that position is over, I hunt for another trade and we put it into that.
If I have another opportunity that comes along, obviously in my subscription service, I have the challenge going on, but I also have my weekly recommendations that I put out there.
So while the challenge is happening, I still have other trades to do.
Adam: Got it. Well, one of the things that jumps out about this for me is that, let’s say you put something on and you’re really excited about it and it goes up, it’s going your way.
And then you come across another trade.
What you actually have to do at that moment is say, “I’m going to stick with number one,” or, “I actually want to switch to number two.”
Is that hard?
Jeff: It’s not hard to do.
It’s really just a matter of measuring the opportunities.
Let’s say, for example, I’ve got a trade that’s on and we haven’t quite reached my goal for that particular trade. Maybe we’re up 50%, and I’m looking for 100%.
But then there’s another trade that comes along that’s even better.
I don’t have any trouble at all saying, “Hey, we’ll take our profits on this, and let’s move over to this particular position.”
That hasn’t happened yet. We’re just four trades into the challenge, so I haven’t had that.
But I imagine that at some point that predicament may come up.
Adam: So you just said something important. You’re four trades in.
So for people who are signing up, they want 12 trades. They say, “Oh, wait a minute. You’re four in. I’m only going to get eight.”
Or is it a rolling sort of thing where it just keeps going?
Jeff: Well, see, that’s exactly it. It is a rolling sort of thing that just keeps going.
The idea, again, being that whatever you start with – let’s say you start with $5,000 – if you double it, you’re doing great.
But as soon as you’ve lost 50%, you cut that loss so you can stay in that position.
So my objective is somewhere within 12 trades, we’re going to win nine to 10 of those trades. We’ll probably take a loss on two of them, which is how we – if you do the calculations – $5,000 becomes $1 million.
If you can double it 12 times, with two of those positions being losers – I don’t know if I made any sense on that – but you’re winning 10 of those, losing two, you’re going to wind up with a million bucks.
Again, I haven’t ever marketed along these lines.
I just think the conditions right now in the stock market and the level of volatility that we’re seeing, the level of rotation out of one sector into another, and it’s happening so fast – this is a unique time in the market where I think this is actually quite possible.
It doesn’t guarantee it’s going to happen.
But even if you just walk out of there having gotten some education about how to trade, learned a little bit about discipline in option trading, learned sort of the ways and the strategies that I utilize when I’m option trading that have kept me in the game for 40 years, and made a little bit of money doing it, I think you’re going to be happy with it.
Adam: I remember as a young options trader, my boss telling me the rule of twos: if you double your money, sell it. If you lose half your money, sell it.
Is that a reasonable way to think about some of this stuff?
Jeff: It’s actually the foundation of this whole challenge.
I’ve always been in the position where anytime I’ve had an option trade where I’ve doubled my money, my rule is I sell at least half of it because I want to take my original capital off the table.
Adam: Off the table. Yeah.
Jeff: In this particular challenge, the idea is essentially, double our money, we’re out of the trade and we’re hunting for the next one.
Or as soon as we lose 50%, we’re out of the trade and we’re hunting for the next one.
So that’s exactly it.
Adam: Now, I would imagine, because I’ve seen your track record, you’ve got a lot of trades that you’ve put on over the years that have more than doubled – 170%, 200%, etc.
I mean, it’s got to be hard to sell something that’s going your way.
Jeff: It’s never hard taking a profit. Never hard taking a profit.
Adam: And again, you will not keep half a position on and then redeploy half the capital into the next trade.
You’ll literally sell the entire position and go all in for the next trade. Is that right?
Jeff: Well, yes.
A lot of it depends on the circumstances that we’re in.
We’ll never have two trades going at the same time for the purposes of the challenge, but I will always take half of the position off at a double.
And so far in the challenge, we’ve been able to squeeze a little bit more out of holding on just a few days longer on some positions.
So by taking half the money out, that ensures that we’re not going to take a loss on the trade.
If we can sell half the position at a double, we take our original capital off the table. We will not take a loss on that trade.
Then I have a little bit more flexibility with what we do next.
If there’s another opportunity that presents itself that looks more attractive, it’s a lot easier to go ahead and sell the rest of that position that’s winning and then move that money over.
If I’m still waiting to find that other opportunity, then I have the patience where I can sit there knowing that I can’t take a loss on this existing trade and let it ride a little bit.
Adam: Yeah. Understood.
I imagine there are some people who are very interested in this, so I just want to be clear and let everyone know we’re putting a link to the challenge below the screen.
So if you’re listening and you want to know more or you want to sign up, you can do that. Just click on the link and you won’t lose what Jeff and I are talking about right here.
Jeff, let’s talk about some of these trades.
I tend to focus on tech names. I’ve got a lot of AI exposure.
Are you in those types of names, or do you sometimes go to some of the other stuff, whether it’s gold miners or nuclear reactor stocks or energy companies?
I mean, do you have a focus?
Jeff: Not a specific focus, a specific strategy, though.
I tend to be a contrarian type of trader.
I look for opportunities in situations that are very beaten down. They’re out of favor. Nobody likes them. People roll their eyes when you mention them.
Those are the kinds of stocks that I’m interested in owning.
It’s the whole buy-low, sell-high scenario that seems to have been forgotten in a very momentum-based market.
So what I look for are stocks that are beaten down, unloved, but with bottoming technical formations.
So it doesn’t look like there’s much more downside, and the upside could be multiples from where it is.
I don’t look to chase momentum trades. That’s not my style.
Momentum tends to shift a lot faster than most people can react to it.
So what I’m trying to do is get folks into positions that are contrarian in nature, that seem to have limited downside and a lot of potential upside.
And that’s what I focus on.
That can come in any sector.
We had an energy name when we started off the challenge.
We bought Peabody Energy, and nobody liked it at the time. It was trading in the low 20s, and it was just an absolute dog.
But I liked the way that it was set up.
It was fundamentally cheap, and it had a technical formation that was my kind of style.
It was a bottoming style, and we did quite well on that particular trade.
We bought gold, GDX, a couple of months ago when GDX was trading down in the 70s.
Again, nobody liked it down there.
Everybody was shunning gold and gold stocks because they peaked in February and then had done nothing for several months.
All of a sudden now, of course, GDX is up in the 90s, and everybody loves it again.
So we had a couple of successful trades off of that.
That’s the type of thing I’m looking for – things that nobody’s paying attention to, people are ignoring, and I think have some attractiveness to them.
Adam: You hear talk about some of these sectors, and some of the sectors will double.
And if you’re doing an options trade, you could actually get a multiple of that.
In other words, if a stock goes from 10 to 20, that’s a double.
But if you’re long the 12-strike call, you paid a dollar and suddenly the stock goes to 20, you made eight.
I mean, is it hard to sell some of these positions?
Jeff: Well, as I said before, it’s never hard to take a profit.
Again, a lot of it depends on what else I see out there.
If I still think there’s more opportunity – for example, if I get into a stock that’s at 12 and I think it has the potential to get to 20 – that option might double by the time it gets to 15.
If I still think there’s plenty of upside potential in that, yeah, I’m going to take a little off, obviously, to get my capital back, but I’ll let the rest of it ride for a little bit.
But again, it depends on what else I see out there.
If I see an opportunity that’s even stronger somewhere else, yeah, I’ll take the profit off of that and I’ll move over.
Adam: Got it. Now, you mentioned that this is a rolling challenge.
In other words, there are four trades you’ve put on thus far, so in theory there are eight more.
But anyone who joins now is going to get 12. Is there a timing element to this?
Jeff: You mean a length of time?
Adam: Well, yeah. Is there a length of time?
Or, and maybe it’s a second question, was there something that inspired you to do this now, in 2026, or mid-summer or going into the fall, etc.?
Jeff: Well, yeah. The type of market that we’re in right now, the type of momentum-based market where funds are shifting, everything shifts so fast.
I think we’ve even talked about this before, where one sector is hot right now, but then it cools off very quickly.
Another sector picks up the baton and starts running with it.
Things are shifting so fast that I think right now, this particular market gives us the opportunity to make those types of trades relatively quickly.
Now, when I first started the challenge, I said, “Hey, we could probably do 12 trades in six months.”
And yeah, we’ll probably wind up doing that.
I’m not locked into that.
I mean, if it takes us eight months, nobody’s going to write me hateful letters saying, “Hey, it took me eight months to make $1 million rather than six.”
So the objective stays the same.
Ultimately, what I want to do is take $5,000, turn it into a million, and work as hard as I can to possibly do that.
But again, I’m thinking we would have about a six-month opportunity in the market to do that.
As it stands right now, I think this market is going to be in that rapid-rotation mode for several months longer.
So I think this can go on for quite some time.
Adam: Yeah. Everyone’s talking about midterms.
Does that have any impact, from your point of view, on this strategy?
Jeff: Well, it does. We’re in a seasonally weak time of the year for the market.
September and October tend to be rather poor months for the stock market.
In midterm elections, September or October weakness tends to be heightened.
Of course, everybody knows that, so I have no idea whether or not the seasonality issues will become a factor here.
But it does have me looking at opportunities where I ask, what happens if money starts pulling out of the market?
What are the types of trades that tend to pay off best when that occurs?
There’s an interesting thing going on right now with the Japanese yen.
The yen is spiking for the first time since February.
We’ve seen two rapid spikes in the yen.
What happens when the yen spikes?
What are the types of opportunities that present themselves, that rally as the yen is rallying?
Because most of the time when the yen spikes, the U.S. stock market suffers a little bit of weakness.
But there are opportunities.
There are stocks, and there are asset classes, that do rally when the yen spikes.
Adam: And you want to give us a couple of them?
Jeff: Yes.
And going back to the contrarian nature, Treasury bonds tend to do quite well when the yen spikes.
Natural gas tends to do quite well when the yen spikes.
So yes, I am eyeing opportunities in those particular asset classes.
Adam: Yeah.
Is seasonality something that people who are watching and listening right now should be concerned about?
Or do you see seasonality more as an opportunity, or is it something you just ignore?
I mean, for the average guy who’s not trading the way you’re trading every day.
Jeff: You can’t really ignore seasonality because it exists.
It happens enough to where it demands attention.
There’s the old saying, “Sell Rosh Hashanah and buy Yom Kippur.”
There’s a reason that saying exists, because typically the period between Rosh Hashanah and Yom Kippur tends to be weak for the broad stock market.
If it had not existed that way before, you wouldn’t have those types of sayings.
So seasonality – you have to pay some attention to it.
You don’t base 100% of your strategy on it, however, because everybody’s aware of seasonality.
Everybody tries to pay attention to it.
And remember back in July, everybody was cautious.
July is usually a tough month.
So it turned out to be a really good month for the stock market despite typical seasonal bearishness.
And the opposite was true in August.
August is usually a really, really strong month for the stock market.
Well, the stock market was so-so.
So you can’t base 100% of your strategy on seasonality, but it should play some part of a role – 10%, 15%, 20%, maybe, depending on what you’re looking at.
And in some asset classes, it demands even more.
I mentioned natural gas.
You can go back through history, and about 80% of the time, natural gas tends to bottom somewhere in the August time frame and rally through the end of the year.
So that’s a pretty strong argument in favor of owning natural gas.
Add to that the second circumstance I just mentioned about the Japanese yen rallying.
Oftentimes – and I don’t know why there’s a correlation there – natural gas rallies as the yen rallies.
Well, that adds more to it.
So from a seasonal perspective and from other factors as well, natural gas looks good to me at this point.
Adam: Yeah. One of the other things everybody’s talking about is the Fed.
Are they going to raise rates? Oh my gosh, what will that do to stocks?
And by the way, will they ever again cut rates?
What’s your take on the Fed, and help us sort of sift through the noise?
Jeff: Well, it’s interesting. I don’t think the Fed is going to do anything. I can see the argument for raising rates.
Obviously, inflation is a little bit complicated at the moment.
The problem is, the Fed controls the short-term rate. The Fed does not control the long-term rate.
And remember back in September 2024, when Chairman Powell lowered rates, everybody was talking about, “Hey, he’s going to lower rates, so long-term rates are going to come down.”
And I was arguing at the time, that’s not necessarily true.
Oftentimes, when the Fed lowers rates, the fear of inflation creeps into the market and the long-term rate actually goes higher.
Well, go back to September 2024.
They lowered rates one full percent – 100 basis points – over the next three months.
Our Treasury bonds are yielding more now than they were back then.
So long-term rates actually went up.
So the question now ought to be, if the Fed does in fact raise rates, does that help bring those inflation concerns under control?
And would that, in fact, actually lower long-term rates?
The Fed may not do anything, but our Treasury Secretary has been out in force talking up the yen, by the way, and talking up Treasury bonds and talking about the Treasury stepping in and buying long-term bonds.
So the administration clearly wants lower long-term rates.
And whether or not they can maintain that longer term is a question.
But over the short term, if you talk a good story, you can create that situation where the long-term bond rallies and long-term rates come down.
Adam: Yeah. Do you think we spend too much time worrying about the Fed?
Jeff: I think our Fed chairman thinks that. Yes.
Adam: Yeah, I think so too. Although I’ve actually been thrilled to hear him say that he wants to give less guidance, because I just feel like all the hand-holding from the Fed, or from corporate CEOs at earnings time – “Here’s what the numbers are going to be next quarter” – I just feel like, I don’t know, they’re babysitting us all too much.
And maybe we just need to grow up and get over all the hand-holding.
What do you think?
Jeff: I would not argue with that at all.
I thought it was quite interesting how Mr. Warsh started off his Jackson Hole presentation talking about wanting to go out and have a hike, take a hike with some of his friends over there at the Fed, and how he remembered taking a hike with Bernanke and using the word “hike” so many times.
He was clearly trying to get the algos all freaked out and get things going in the market off of that.
I think we don’t appreciate him as much as we should, and I’m looking forward to his tenure as Fed chairman and what he’s able to accomplish with that.
Adam: Yeah, I am too. I feel like a sober voice of reason.
And I would say the same thing about Scott Bessent. I think they are two adults in Washington, and I’m thrilled they’re in the positions they’re in.
Jeff: I concur.
Adam: Yeah. Jeff, this is great, and I’m so excited about the challenge.
Again, for everybody who’s interested and also excited, the link is at the bottom of the screen, and people can sign up right now.
Jeff, before I let you go and get back to work, anything else you want to share with people about the challenge?
Jeff: Well, no, not necessarily about the challenge.
But I will say, since we’re heading into September or October, if we do in fact get a little bit of a pullback here – and maybe not anything too dramatic, maybe something that is, I don’t know, 5% would bring us down to 7,300 on the S&P – I think that would be an absolutely fantastic opportunity to take long exposure heading into a year-end rally.
Because I think we are going to finish the year quite strong.
I would just like to start off from a lower level.
So if I was sitting in cash right now, I would certainly put a long list of potential stock opportunities together.
I would look for the stocks that I really want to own, the prices at which I’m willing to pay for them, and be willing to take a shot when and if they come down to those levels.
Because I think we’ll get that opportunity if we see some weakness over the next few weeks.
Adam: And I would assume you’re saying that because earnings growth is so strong. Is that right?
Jeff: Well, that’s part of it. Obviously, earnings growth is strong. But also, the money flows into the market are quite strong as well.
And that is really what pushes stocks in the short term. You can look at stocks long-term based on earnings, based on dividends, based on book value, all sorts of fundamental factors.
But over the short term, it’s money flow and it’s investor emotion. And you’ll have an opportunity, if investors get fearful over the next couple of weeks, you’ll have an opportunity to put some money to work and get in advance of that money flow.
Adam: Yeah. Love it. Jeff Clark, thank you for sharing your expertise today.
It’s been a real pleasure and fun, as always, to talk with you.
Jeff: My pleasure, Adam. Thanks for having me.
Adam: All right. Well, that does it for us this week.
But the good news is we’ll be back next week with another insightful interview, helping you make money right here at TradeSmith.
Best regards and good trading,
Jeff Clark
Editor, Market Minute