Why Size Matters (In Trading)

Why Size Matters (In Trading)

Posted On July 27, 2021 2:58 pm

Today will be a quick one as I’m sussing out the ways to play Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL) which all report after the close today. 

As mentioned over the past two weeks, I had turned cautious on stocks, even as the indices pushed to new highs. I explained why I established a bearish position on Friday in Invesco PowerShares (QQQ), using the Monday, Wednesday options to execute rolls to reduce cost basis.  My reasoning was because even if the stocks mentioned above post blow-out numbers,  they could be met with a “sell the news” reaction.  Well, like most things in this modern world, everything happens faster.  So, is today’s sell-off occurring without even waiting for the news? 

Whatever the reason, we have now executed two rolls bringing the cost basis of the position from $440 to $120, with the opportunity for two more rolls. 

Claim your SPECIAL OFFER into the Options360 Concierge Trading Service. It’ll be, as our trading experts put it: “The best $19 you’ve ever spent.”

However, I’d really like to respond to the following  reader question: “You’re always touting 50% or more profits on the trade, so why is your service up only 24% for the year?” 

First, let’s be clear, I also divulge my losers such as here in Mosaic (MOS), Pulte Homes (PHM), and Pure Cannabis ETF (MSOS). 

Second, 24% is nothing to sneeze at.

The key to having consistent profits is managing risk. This starts with identifying good risk-reward entry points.  But, of equal if not more important, is position sizing.  The basic rule of thumb is that no one position should be over 5% of your total portfolio. 

Options360 resets the account $10,000 each year.  This is an amount that should allow most people to partake. If you have a larger account or higher risk threshold, that’s good for you.  I’d rather people dial up their size than intimidate or prevent participation by staying.  Options360 runs a $1 million account and they say “oh, that’s not for me.” 

The bottom line: You want more winners than losers, and the profits from those winners to be larger than the losses. 

Get Full, Unrestricted Access to the Options360 Concierge Trading Service With This Crazy $19 Promotion!

Here are the stats for Option360 trading service over the past year and a half. 

In 2020. we at Options360 executed 97 trades, 76 winners, and 34 losers.  Profits averaged $98 while losses averaged $57. That’s basically, twice as many winners as losers for twice as much profit. 

options360 dashboard

The statistics are pretty similar for 2021 thus far: 

options360 stats 2

So, while absolute numbers of just $100-$200 on each trade may seem pedestrian compared to people boasting about making $987,645.10, I’m being realistic. 

Realistic, transparent, and consistent. These “small” numbers add up to the Options360 trading service returning 39%-120% over the past six years. 

I keep my size small, so I can stay in business and continue marching up and to the right. 

[LAST CHANCE] For just $19 ($997 value!), access the unique trading approach that’s delivered its members 39% to 122% annual gains — the Options360.


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.