By: Steve Smith
Buffett’s 2 rules of investing are well known and revered on Wall Street.
Rule 1: Never lose money, and
Rule 2: Never forget rule 1
Obviously, that isn’t realistic…
Even the great Oracle of Omaha has lost money on his positions.
The idea is not to “never lose money,” the idea is to manage your positions properly to ensure that losses are minimized and gains are maximized.
For example, at the end of August, we exited several profitable trades and I needed to “restock” the cupboard.
So we opened positions in ATVI, AMAT, and WYNN. Shortly after I opened the positions, the September sell-off started and the trades moved against us.
So we went into management mode…
And have been reducing our cost basis in the trades over the last few weeks.
At this point, we have approximately 80% of the original investment back, and we still have the positions.
Here’s the point, we’ve set ourselves up to make a nice profit if the trades turn around now that the market sell-off seems to be over…
And if the trades don’t turn around in the next few weeks, we only have a very small loss.
Obviously, I like to highlight winning trades, but more important than the winning trades is properly managing and reducing risk on trades that don’t immediately go our way.
The truth is, no matter how good you are, you will have losing trades.
My value to my subscribers goes WAY beyond finding good trades. My value to my subscribers is in my experience and ability to minimize losses and maximize gains in any market.
I don’t mean to sound immodest, but I’ve been knee-deep in the market since I started working for my father as a teenager.
Always look for great trades, but also manage your portfolio and risk properly…
That’s how you beat the market year in and year out like we have in Options360 since 2015.
To Your Success,
PS. Make sure to grab your $19 trial to Options360 while it’s still available. You can get all the details here.
Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.
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