In the final part of the “Top Dogs” series, Tom & Tony discuss how to manage expectations in a large portfolio, $250k+.
In Part 5, Tom and Tony review their entire portfolio and discuss adjustments they have made to their positions by managing winners at 50%, re-establishing new core positions and rolling tested positions. To help offset risk with their short 1,500 IWM shares, they sold covered puts and additionally got long 5 covered calls in QQQ.
Since the start of the series, the portfolio is up roughly three percent. The portfolio showed that Undefined Risk Strategies outperformed the Defined Risk Strategies.
The guys explain two adjustments they are planning for in the upcoming week; closing out 2 of the 5 Covered Call contracts in the QQQ, and rolling the Goldman Sachs put spread since there is less than 2 weeks to expiration.
Tom and Tony remind viewers that although the portfolio has seen profits since the start of the series, losses can inevitably happen. For example, if a trade had a 68% probability of profit, it implied that there was a 32% probability of loss. Drawdowns do happen and they typically expect that to happen about 32% of the time over many occurrences.
Going forward, Tom and Tony plan to sell puts against their short stock and sell calls against their long stock. They will also look for defined-risk opportunities in liquid stocks and ETFs as they take off their current positions.
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