Exclusive: Take a Peek Inside My Trading Portfolio!

Exclusive: Take a Peek Inside My Trading Portfolio!

Posted On January 22, 2021 3:37 pm

This week, my Options360 Service has been in management mode. I’ve made no new trades. Instead, I’ve been tending to the current seven open positions — ensuring that they’re healthy and in good stead. This allows me to leave them mostly unattended for the next few days while I hunt and forage for new trade setups. 

To be clear: I’m not doing this so I don’t look longingly at some market segments where irrational exuberance can take hold, nor am I trying to call a top.   

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What I’m doing is staying in my lane, using the power of options to grind out consistent returns. Just as I’m typing away, this the great poem by Rudyard Kipling comes to mind;  

“If you can keep your head when all about you   

Are losing theirs and blaming it on you,   

If you can trust yourself when all men doubt you,

But make allowance for their doubting too;   

If you can wait and not be tired by waiting,

Or being lied about, don’t deal in lies,

Or being hated, don’t give way to hating,

And yet don’t look too good, nor talk too wise.”

The point that I’m trying to hammer home is that even with pockets of wild speculation in electric vehicle stocks, D-printing, or anything brought to the market through a SPAC, I know that myself and my Options360 Service members are best served by avoiding the hype and instead focusing on what I do best: Identifying solid setups and using tried-and-true option strategies to deliver consistent returns.  

The Options360 Service rarely swings for the fences, but it’s focused instead on making safer trades that produce more consistent profits. 

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Let me take you through some of the Options360 Service’s current positions. 

First up is Best Buy (BBY), its current open position is long 2 contracts Feb (2/19) 102 Call and short 2 contracts BBY Jan (1/29) 105 Call at a  $2.50 cost basis.  After two weeks of watching the stock lay like a dog on the $100 line, we took a defensive intraweek roll, only to see it ramp above $114 last week.  We took another roll and reduced the initial cost basis from $6.10 down to $2.50.  We’re basically locked in for a modest profit with the flexibility to execute two additional rolls, further reducing the cost basis. 

Wal-Mart (WMT) was established as a bullish diagonal on Jan 6th by purchasing  2 contracts Feb (2/19) 145 Calls and short 2 contracts Jan (1/22) 150 Calls at a cost basis of $4.90.   The stock took a hit the past few days on news that its executive in charge of eCommerce, will be leaving the company.  We rolled down and out the short call to the (1/29) 149 strike to collect $0.50, bringing the cost basis down to $4.40. 

The next two are the speculative portion of our portfolio where I employed ratio call spreads, which provided unlimited upside potential.  

INAQ, a company I mentioned before, is the digital auto insurance company that went public through a Mark Cuban-led SPAC.  The position was initiated on January 4th with a bull ratio of long 3 contracts Feb (2/19) 17.5 Calls and short 2 contracts Jan (1/515 ) 17.5 Calls for a $430 net debit.   

Last week, with the Jan call set to expire, I rolled them up and out to the Feb 20 calls.  This resulting position for Options360 Service members is long 3 contracts of the Feb 17.5 calls and short 2 contracts of the Feb 20 calls at a $2.15 cost basis.  Our risk or cost has now been cut in half while the 3×2 contract position profit potential remains unlimited. Now, we just need Cuban to come on CNBC to hype this baby.

I have a similar ratio call spread in Electrameccanica Vehicles (SOLO), an EV company that looks ready to explode to new highs.  I’ll keep the specific strategy to myself and Options360 members —  but don’t mind sharing the name. 

A tamer position was established in iShares 20-Year Bond (TLT) as a bull diagonal of long 2 contracts March (3/19) 148 Calls and short 2 contracts TLT Jan (1/29) 152 Calls at $3.95 cost basis. Earlier this week, I took an early roll; bought to close the 1/29 152 calls and sold to open the Feb (2/05) 152 calls, allowing us to collect a $0.45 additional premium, bringing the cost basis down to $3.50.  

I’m happy for all the people riding SPAC, EV, and Bitcoin-related stocks for huge gains. However, it’s indeed not my game.  

So while the new breed of traders can launch 3-pointers from the half-court line, I need to keep backing my butt up into the paint for a high-probability backshot.   Keep grinding! 

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About author

Steve Smith

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.