How I’m Outperforming the S&P 500 by 50%

How I’m Outperforming the S&P 500 by 50%

Posted On July 2, 2021 1:51 pm

The U.S. is heading into a long 4th of July weekend, while it simultaneously marks the end of  2021’s first half. And if I must say so myself: Boy, does time fly! Nonetheless, It’s a good moment to assess where we are in the Options360 service and where we think the market’s going. 

For the most part, the song remains the same; namely bullish. The two main forces of a strong economic recovery and an accommodative Federal Reserve are providing investors with the confidence to keep pushing stocks higher. 

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As far as Options360’s performance, it’s also steady as she goes. After a small rough patch in April and May — where we incurred a 6% drawdown — we’ve righted the ship and are currently up 21% for the year-to-date. It’s not a lights-out performance, but it is outperforming the S&P 500 (SPY) by 50% (the S&P 500 is up 14% YTD). More importantly, it’s delivered 39% to 122% member PROFITS EVERY, SINGLE YEAR since I started it in 2015!

However, I’ll be completely honest with you: Even as the major indices march steadily higher, it’s been a rather tricky market for me to trade.  This is due to the underlying rotation which seems to swing back and forth between sectors on a near-daily basis.  Also, I don’t get involved in meme stocks, which have helped some people garner huge profits. 

Rather, I’ve been sticking to my knitting by trading large-cap liquid names and using spreads to define my risk and reward. 

This week has mostly been about managing existing positions via rolling the diagonal spreads in Walmart (WMT), Akamai (AKAM), and Airbnb (ABNB) to bring in income and reduce cost basis. 

We also closed out a bullish position in Sketchers (SKX) for a 42% gain over the 3-week holding period. 

Part of my reason for reducing my overall exposure is that earnings season’s just around the corner and I want to ensure I’m not inadvertently taking on that event risk.  I’ll be making specific earnings trades in the Earnings360 Service. However, that’s a more speculative approach than I take in the Options360 Service where it’s all about grinding out steady and consistent gains over time.  

Let’s hope the second half of 2021 continues on that path. 

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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.