By: Steve Smith
Over the past week, the Options360 Concierge Trading Service has been hedging risk and closing positions. This is not an indication that I’m bearish or the shame of having ‘paper hands’ but rather my prudent position and portfolio management.
After taking two steps forward and 1.8 steps back, in the first six months of 2021, I was more or less stuck on a treadmill of producing mediocre 15%-20% returns.
I could live with that, but I certainly want to provide Option360 members with as much profit as possible. When the portfolio was up some 20% in June, I stated I was falling short of my goal of closing out the year above 50%.
To be clear, I don’t make money-based trading decisions. Though admittedly, it’s hard to ignore your p/l day in and day out. However, I try to focus on each position’s risk/reward and how that changes through time in price.
In each case, I closed the position early (if considering the expiration dates I owned). But, just as you should trade money you also should not trade time.
AMD, PAGS, and BYND had all achieved solid profitability with them all reporting earnings next week. These positions had played out well, and my decision was to secure the bag rather than mess with an unpredictable event.
Now, with most of my inventory cleaned out, I’m free to take a mean and aggressive stance on new trades. And I expect as earnings hit full stride next week, there will be plenty of opportunities.
In Monday’s article, “How Retail Traders Can Successfully Navigate Earnings,” I mentioned a recent position in Teledoc (TDOC). I’ve already made two adjustments as the stock jumped above $140, giving us a near-free ride heading into next week’s earnings report.
I can drill down the details tomorrow.
But, today’s message is, keep your house clean by closing both winners and losers as their risk/reward becomes unattractive. This will free up money and your mental bandwidth to identify and act on new opportunities.
After a somewhat desultory first half of the year, I’ve regrouped, became more nimble and ruthless in adjustments, or jettisoning positions that have reached maximum profit or slim-to-no hope of doing so. This approach has propelled Options360s returns to 51% for the year-to-date.
Now, I’m incredibly excited to restock our cupboard and rack up more outsized gains during the last two months of the year.