Citadel’s Strategy Anyone Can Use — 100% In 12 Months

Hey fellow traders! I wanted to share a bit about how I manage my trades for consistent gains since I don’t see many posts about strategically managing your positions and thought it might be helpful for everyone. This is obviously just my way of doing things. There are an infinite number of ways to manage your trades based on your own goals, risk tolerance, and the position performance.

Feel free to look at previous posts for more details about my strategy and performance. Short version: I’ve been trading for 25 years and have consistently beat the market. The past 18 months I’m up 170% with a goal of hitting 10% per month (but I usually hit closer to 6–7%).

Strategies for Managing Trades

I generally am holding 10–15 positions at any given time. Since I’m swing trading, those positions might change some week to week. It’d be so much easier if every trade I made went up 10% over 2 weeks, I could sell, and do it over again. No management necessary. Sadly that’s now how trading works. Some stocks go up immediately, some stay sideways, and some fall.

1. There are times when the stock hits your profit target and you just take your profits 😊

2. Sometimes you have to sell at a loss. This is usually if the stock falls and breaks my buy/hold box criteria. I’m a momentum trader. If the momentum shifts quickly to the downside and there isn’t much evidence for a return back then I just sell and move on to the next

Those are the easy ones. Now lets look at managing a position when you aren’t ready to sell. (pricing is as of Monday 12pm ET). These assume you own 100 shares of the stock and are buying/selling 1 option per 100 shares.

1. Covered Calls: you can sell call options against your position.

• When: If a stock is trading sideways but you feel that there is still upside potential

• Benefit: Collect option premium while you wait

• Downside: If the stock sky rockets then you are limited in your upside. So be sure to set the call price at a level you are happy to sell at

• Example: I currently own MBLY (Mobileye). I bought it at $30.50. It’s now at $32.50. I can sell 6/21 expiring calls @ $35 strike for $1.20. That’s 3%+ premium in 2 weeks.

• If the stock hits $35 then I make 18.5% gain. 14.8% from stock appreciation + 3.5% premium

2. Protective Puts: Buy puts against a position you own.

• When: If a stock has fallen slightly but I really feel good about its upside

• Benefit: Protects your downside so you have a floor on how much you can lose

• Downside: your break even will be higher than your stock entry price so it has to go up more to make money

• Example: I currently own SOFI (Sofi Financial). I bought it at $7.15. It’s currently at $7.08. So I’m down about 1% so far. I think the Fed meeting this week could really cause it to swing one way or another.

I buy a put option at $7.00 strike for 6/21. It costs me $0.17. So my break even price is now $7.32 ($7.15 stock price + $0.17 put option)

My max loss is only 4.3% since the put option gains value as the stock price falls. But my max profit is infinite.

3. Collar: If you own 100 or more shares you can buy a put and sell a call option to provide protection + upside. This essentially combines a covered call and a protective put

• When: I use this if a stock has gone up since I bought it and stalled but I feel there is a good chance for more gains. Since I’m already green the protection pricing (put option) is usually cheap. I set the put option at close to my purchase price

• Benefit: Collect some premium and have protection against downside while allowing for gains

• Example: I currently own MBLY (Mobileye). I bought it at $30.50. It’s now at $32.50. I can:

• buy a $31 put option expiring on 6/21 for $0.80

• sell a $35 call option expiring on 6/21 for $1.20

• The spread on this gives me a $0.40 credit

• Since I’m already green on the position this spread now guarantees me profit. If the stock falls to $31 or less then I still make 2.7%. If it goes up to $35 or higher then I make 16%

Apologies if this is a bit long/complicated. I don’t use these for every position I own. But I do use them periodically when I see opportunities like the MBLY collar. I like the idea of guaranteeing my profits and still having upside potential. Hopefully this helps give you ideas on how you can manage your positions.

Does anyone else do this regularly or perhaps something different that works for you? Always love to learn new ways to look at trading