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This interview features risk manager and trader Michael Toma, recorded in a casual, behind-the-scenes setting that shows how he actually operates. Toma works with futures, a smaller dose of forex, and a significant options-premium component, and he explains why he shifted from pure money management to a more “overseer + educator” model. He matters because he blends corporate-grade risk management with real trading, translating big-firm controls into practical routines any retail trader can apply.
In this piece, you’ll learn how Toma structures client relationships, builds transparency, and keeps size sane while returns compound. We’ll unpack his reporting cadence, the risk metrics he actually watches (think drawdowns, value-at-risk, risk of ruin), and how automation plus simple tech (laptop and phone) let him manage trades from anywhere without micromanaging. You’ll walk away with a clear blueprint for trading other people’s money the right way: start small, educate constantly, normalize wins and losses, and scale only when the process—not the P&L—proves it.
Michael Toma Playbook & Strategy: How He Actually Trades
Account Setup & Instruments
Here’s how Michael Toma builds a clean, flexible foundation before a single order goes live. The goal is simple: trade what you can size precisely and monitor in real time, without platform clutter.
- Trade primarily CME futures and index options; keep any FX exposure small and clearly hedged.
- Use one primary broker for execution and a separate analytics stack (journal + risk dashboard) for objectivity.
- Segment accounts by mandate: personal, client, and strategy “pods” (e.g., premium selling, directional futures).
- Disable unused order types and hotkeys; whitelist only the order tickets you actually use.
- Keep margin utilization under 35% during normal conditions; set a hard 50% ceiling you never cross.
Risk Framework That Doesn’t Break
Toma leads with risk math first, narratives second. This section makes the portfolio hard to kill, so the edge can compound.
- Cap portfolio max drawdown at 10% (soft) and 15% (hard stop trading/scale down by 50%).
- Limit single-trade loss to 0.25%–0.50% of equity; never exceed 1R on correlated bets in the same session.
- Predefine risk of ruin to <1% using your hit rate and R-multiple; if breach >1%, cut gross exposure by 40% until recovered.
- During event risk (CPI, FOMC, NFP), halve size or neutralize delta; re-open only after the first 15–30 minutes of post-event range sets.
- Use ATR- or implied-volatility-adjusted stops; widen stops only if you also cut size so the dollar risk stays constant.
Position Sizing & Scaling
Sizing is systematic, not a vibe. The aim: keep winners large through scaling rules while preventing losers from ballooning.
- Start at 0.3–0.5x base size on first entry; only add if trade moves in your favor by 0.5–1.0R.
- Hard rule: never add to losers; reduce to half-size if price closes beyond your initial stop on any 5-minute bar.
- For options, scale premium exposure by VIX/IV rank: below 20 IVR = half size, 20–40 IVR = base size, >40 IVR = quarter width + staggered entries.
- Daily portfolio VAR must drop when adding new risk; if VAR rises, offset with hedges or skip the trade.
- If two positions share >0.7 correlation, combine their risk as one position when calculating size.
Entries That Don’t Depend on Prediction
Entries are mechanical: location + confirmation. No guru calls required—just repeatable setups.
- Futures: enter on pullbacks to VWAP or prior day high/low with confirmation from delta divergence or failed auction.
- Options premium: sell spreads only when price is outside a 1-standard-deviation intraday extension and IV rank ≥ 25.
- Wait for a clear trigger: a 1-minute close back inside the key level or a footprint absorption signal at the edge.
- Avoid the first 3 minutes after the cash open; let liquidity stabilize before committing size.
- If the best price is missed, skip; don’t chase—only trade first planned touch or the next planned level.
Exits, Stops & Profit Taking
Exits are where most traders leak P&L. Toma’s approach: pre-commit to levels and automate them where possible.
- Place initial stop at structure (beyond last swing/volume node) or at options short strike breach + small buffer.
- Partial at +1R; trail remainder behind session higher low/lower high or a rolling 3x ATR(5m) stop.
- Time stop: if the price stagnates for 60–90 minutes without progress, exit to free margin.
- For credit spreads, buy back at 50% max profit or 21 DTE, whichever comes first; at 2x initial credit adverse move, close immediately.
- End-of-day rule: flatten intraday futures unless it’s a designated swing with overnight margin already budgeted.
Options Premium Selling (Defined Risk First)
Premium selling funds the account only if risk is capped and events are respected. This section keeps the lights on.
- Prefer vertical spreads over naked short options; keep defined risk widths tight when IV is extreme.
- Place short strikes beyond expected move (±1.0–1.5σ) with liquidation rules if spot closes through your short.
- Use symmetric iron condors only when range contraction is confirmed; otherwise, skew to the dominant trend side.
- Roll losers forward only if roll reduces total risk and keeps max loss no worse than the original; no “hope” rolls.
- Keep gross theta exposure under 0.75% equity/day; if exceeded, reduce positions until daily decay fits risk budget.
Trade Management & Automation
Toma runs a lean tech stack: alerts and checklists do the heavy lifting so you don’t overtrade.
- Automate OCO brackets: entry + stop + profit target placed together on submit.
- Use conditional orders to re-enter only at pre-marked levels; remove all discretionary mid-air changes.
- Set platform alerts for VWAP tests, IV rank thresholds, and spread mark prices; act only when alerts fire.
- Journal automatically via trade exports; tag each trade by setup, market regime, and mistake type.
- If two consecutive mistakes occur (missed stop, wrong ticket), enforce a 24-hour cooldown.
Portfolio Construction & Hedging
Think like a risk manager: fewer moving parts, clearer deltas, and hedges that actually hedge.
- Keep net portfolio delta within a pre-set band (e.g., ±0.5 delta per $10k notional); rebalance with micro futures.
- Run a “two-engine” book: one directional engine (futures/swing) + one income engine (credit spreads).
- Cap sector/asset concentration to 40% of risk; rotate to uncorrelated underlyings when clustering spikes.
- Hedge event weeks with cheap, near-dated options or reduce gross exposure by 30–50%.
- If realized correlation > target, reduce positions until portfolio VAR returns to baseline.
Daily Playbook
Consistency beats brilliance. This routine keeps you aligned with the plan, not the headlines.
- Pre-market (30–45 min): mark levels (overnight high/low, prior day extremes, key nodes), note catalysts, set alerts.
- Session: trade only planned setups; max 3 attempts per idea; if third fails, stand down for the day.
- Post-market: export fills, grade each trade (A/B/C), update equity curve and VAR, and write one improvement rule for tomorrow.
- If daily loss hits 1.5x average daily gain, stop trading for the day.
- Weekly reset: archive screenshots, recalc risk of ruin, and prune any setup with a negative 20-trade expectancy.
Managing Other People’s Money (OPM) The Right Way
If you manage capital, trust and transparency are the edge. Treat communication like risk controls.
- Start new clients at a micro size with a 90-day probation; scale only after meeting drawdown and process KPIs.
- Send a simple weekly dashboard: net P&L, drawdown, open risk, fees, and upcoming catalysts—no hype, just facts.
- Use plain-language mandates: what you trade, how you size, max drawdown, and when you’ll cut risk.
- Hard rule: if the soft drawdown limit is hit, reduce gross by 50% and notify clients within 24 hours.
- Keep fees simple (e.g., flat admin + performance over high-water mark); no complex lockups.
Psychology & Error Control
Mindset is a set of rules—not slogans. Build guardrails that make the right action the easy action.
- Define your three allowed emotions during the session: calm, curious, clinical; anything else triggers a break.
- Use a two-strike mistake policy per day; after strike two, switch to sim for the next hour.
- Prohibit P&L on the main screen; display only risk metrics, open risk, and level map.
- If sleep <6 hours or mood score <7/10, halve size; if <5/10, no trading.
- Celebrate process wins (perfect execution) regardless of outcome; log them alongside P&L.
When to Stand Down
Knowing when not to trade is alpha. Preserve capital and mental energy for A+ windows.
- Skip sessions with platform issues, abnormal spreads, or news floods you can’t quantify.
- If volatility regime shifts abruptly (e.g., VIX +30% intraday), cut size to one-third until a new baseline forms.
- No revenge trades after a max-loss day; next session starts at half size with only one strategy active.
- During holidays or thin liquidity, switch to defined-risk options or don’t trade.
- If three losing days in a row on the same setup, pause that setup until a fresh 20-trade review says it’s positive.
Size Every Trade by Volatility; Cap Drawdowns Before They Snowball
Michael Toma keeps position size tied to current volatility, so a hot market doesn’t torch his account. He translates ATR or implied volatility into dollars at risk, then fits size so a single loss is small and repeatable. If volatility doubles, size halves—no debate, just math. This keeps losers uniform and prevents one outlier day from defining the month.
Toma also sets drawdown guardrails before trading begins, with a soft line to throttle risk and a hard line to step back. By scaling down when heat rises and pausing when limits are hit, he preserves decision quality and capital. The lesson from Michael Toma is simple: let volatility set your size, and let prewritten drawdown rules pull you out before damage compounds.
Build Two Engines: Directional Futures Plus Conservative Options Income
Michael Toma splits his book into two engines so one can work when the other stalls. The directional engine hunts clean setups in liquid futures—entries near VWAP, prior-day extremes, or obvious structure—so winners can stretch. The income engine sells defined-risk options for steady theta without nuking the account on event days. By separating intent (growth vs. cash flow), Toma avoids blending signals and keeps sizing rules crystal clear.
He keeps correlations in check by dialing one engine down when the other is running hot. When volatility spikes, Michael Toma often trims directional bets and lets the options engine work smaller but safer. When markets trend cleanly, he leans more on futures and keeps premium selling modest to avoid over-hedging his edge. Two engines, one dashboard: clear risk limits, scheduled reviews, and a hard rule against letting one engine rescue the other.
Diversify by Underlying, Strategy, and Duration to Smooth Equity Curves
Michael Toma spreads risk across symbols that don’t all move together, so one headline can’t wreck the whole day. He mixes equity indices with rates, energy, and metals, then rotates exposure when correlations spike. Strategy-wise, he pairs directional futures with defined-risk options so trend and mean-reversion edges don’t fight for the same dollar. This blend turns a jagged P&L into something steadier and easier to size.
Duration matters too. Michael Toma staggers intraday trades, swing positions, and options at different expirations, so exits aren’t clustered and liquidity crunches are less painful. He caps any single theme’s risk, rebalances when one sleeve dominates, and cuts positions that turn highly correlated in real time. The goal isn’t more trades—it’s independent payoffs that keep the equity curve rising even when one idea cools.
Trade Mechanics Over Predictions: Predefine Entries, Exits, and Re-Entries
Michael Toma trades the plan, not the forecast, by locking his rules before the bell. He defines entry locations at objective levels and only pulls the trigger when the price gives a clear confirmation. Stops live at the structure the moment he enters, and targets are sized to the setup’s expected range. If the level is missed, he skips the trade instead of chasing.
Re-entries are preplanned too: same level, smaller size, only after a fresh confirmation candle closes back in-bounds. Michael Toma uses a time stop when momentum stalls so capital isn’t trapped in dead money. He automates brackets to remove hesitation and keeps P&L hidden during execution to reduce bias. When rules conflict, the most conservative condition wins—mechanics over opinions every time.
Choose Defined Risk First; Automate Rules and Review Mistakes Daily
Michael Toma favors defined-risk structures, so a single headline can’t blow past his plan. He uses vertical spreads and tight stops so the maximum loss is known before entry, not discovered after. Brackets fire automatically—entry, stop, and target—so the system acts even if he hesitates. If volatility expands suddenly, he cuts size first, not logic. Defined risk keeps him in the game long enough for the edge to matter.
Automation is paired with accountability. Michael Toma runs a quick post-session review to tag mistakes, rewrite one rule if needed, and reset the size after errors. Two consecutive execution errors trigger a cooldown to protect capital and mindset. The result is a loop: codify, execute, audit, and tighten—simple habits that turn rules into reliable returns.
Michael Toma’s message lands the same no matter which part of his process you study: protect the downside with math, then let simple mechanics repeat. He sizes every position to current volatility, sets soft and hard drawdown lines in advance, and refuses to add to losers. His book runs on two engines—directional futures for growth and defined-risk options for income—so he’s never hostage to a single regime. Diversification isn’t just more tickers; it’s mixing underlyings, strategies, and timeframes so one headline or time window can’t wreck the week. Entries, exits, and re-entries are prewritten; if the price misses his level, he skips. He favors defined risk over bravado, automates brackets, and uses time stops to keep margin free for the next clean setup.
Beyond the screen, Toma treats communication and review as risk tools. He keeps client relationships transparent, reports the numbers that actually matter, and scales mandates only after process KPIs are met. The tech stack stays minimal—alerts, a laptop, a phone—while the journal does the heavy lifting after hours. When volatility spikes or events hit, he cuts size first and lets the plan breathe. The compound effect is a trader who looks quiet from the outside but is relentless about rules inside: measure risk, execute simply, review honestly, and show up tomorrow with the same plan—slightly tighter than yesterday.
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