My ‘Unconstrained’ Approach to Being a Successful Trader

My ‘Unconstrained’ Approach to Being a Successful Trader

Posted On June 4, 2021 3:56 pm

I often describe the Options360 Concierge Trading Service as being “unconstrained,” meaning — depending on the circumstances — I could employ a new strategy at any given time. But, make no mistake about it — this does NOT mean I operate without an underlying framework.  The basic underpinnings of my approach are as follows; defined risk/reward and a combination of directional moves along with income generation. 

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This week it was made abundantly clear that it’s imperative to find and stick with a trading style that works for you. Meme trading, what I call “momentum on steroids,” isn’t for me.  However, many people love it, and are registering huge profits. That style has always been where big quick profits are made — my hat is off those that can successfully ride the beast, both bull and bear. 

However, what’s worked for me and Options360 Concierge Service members is the aforementioned “unconstrained” approach. With this respective approach, I apply the options strategy that best aligns with your trade thesis, and provides more balance, flexibility and ultimately delivers more consistent and sustainable profits.

This week’s Options360 activity provides a good snapshot of what “unconstrained” is not: Chaotic or overly aggressive. Instead, it’s the mixing of different strategies to find a balance. 

For example, Options360 continues to hold bullish positions in Microsoft (MSFT) and Advanced Micro Devices (AMD) this week. They were initiated as diagonal spreads.  The stocks have stayed in range and are both showing solid gains thanks to rolling or collecting weekly income.  They now have very limited risk or reward as they approach next week’s expiration — when I expect to close them for about a 35% gain each.  Believe me, I would’ve preferred that the stocks cooperated early in the cycle allowing for a quick gain.  But, using my thesis that these stocks could chop around for a while, I applied a diagonal spread, which gave me the flexibility to grind out longer-term profits. 

This compares to this Tuesday’s AirBNB (ABNB) trade.  In it,  I used a ratio spread that benefits from a quick move higher, and provides some protection and mitigation of lower move, and time decay.  ABNB popped some 4% the next day and I closed the position for a 45% gain.  I didn’t need to get married to it.  Though I’ll admit that I’m flirting with a new entry if it shows it can hold at the $150 level. 

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I added a new position in JD.com (JD), also using a ratio spread that can profit on a quick move higher.  In the last few days, JD moved lower — so I made adjustments to cut my cost basis in half while maintaining unlimited, upside potential.  I emphasize “potential” because I always keep realistic targets.  In JD’s case, I’ll exit when/if the stock crosses above $80, to achieve 50%-60% returns. 

Today, I added a Wal-Mart (WMT) bullish diagonal trade that I think can work higher in the next two months.  The trade’s structured, so it can profit if shares quickly pop.  But, much like the MSFT and AMD mentioned above, I’m fully prepared to grind it out by collecting premium through weekly rolls. 

I hope this glimpse into how the Options360 Concierge Trading Service’s unconstrained approach towards strategies employed and time frames balanced with well defined risk/reward parameters, leads to realistic and consistent returns.  The second most important thing is the life balance it allows me.  After this sentence is written, I get to walk to the beach for a stroll and dip in the ocean.  If I decide to return prior to the close, it’ll be out of curiosity rather than necessity. 

Enjoy your weekend!


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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.