Strategy Session: Don’t Waste Time, Keep The Cash Flowing

Life in the market is all about two things. First, you need to accept Wall Street’s mood swings. But then you need to make sure you find a way to participate while waiting for the mood to swing back in your favor. That’s what we’ve been doing with our options trading.

You have to stay in the game. My 2-Day Traders have come in off the sidelines once a week in the past three months, making 14 trades in total. We come in, we take what the market gives them and then we get out again.

The cycle only takes about 48 hours, which leaves us with about 60% of the market week to rest and monitor our charts. During that time, we’re aloof. Untouchable. The market can swing as wildly as it wants because we aren’t in it.

How can we afford to be so relaxed? It boils down to keeping the cash flowing, week after week. Some trades make money and some don’t, but on average we’ve managed to squeeze a net 0.48% per trade in profit out of our recent season. That might not look like much, but multiply it across 14 trades and you can see how the income adds up.

My math says that’s a total score of 6.72% for the last 90 days. Think of it as income. It’s how we keep our money working while longer-term bets mature.

I’d rather cash a 6.72% check after 90 days than hang out in the bond market earning 4.86% a year. Even short-term bonds pay less than how those 2-Day Trades stack up . . . and short-term yields are going down once the Fed starts loosening.

That’s the key. Bull or bear, up or down, 2-Day Trader has been an old-school printing press since 2019. In a little less than five years, we’ve been in 275 trades, each carving a slight net gain out of whatever market conditions prevailed in the moment.

Add it up and we’ve booked steady income here. And don’t forget, those 275 trades each started and stopped within 48 hours on average. Some went a little longer, of course. Others paid out in a matter of minutes. It all evens out.

Do all that math and, yes, we were only in the market about 35% of the time. In those other days, our money was free to work elsewhere . . . or simply safe in cash. That’s okay.

People often ask me where I see the market going. The long-term answer is always up. The short-term answer, as far as 2-Day Trader is concerned, is that it doesn’t matter. Across multiple bear markets and bull markets, we’ve kept the net returns positive, month after month, year after year.

It’s not as passive as simply buying a bond and sitting on it. But the problem with bonds is that once you buy it, you’re never going to change that coupon yield. The options market ebbs and flows. There are hot and cold periods.

Right now we’re on a hot streak. Eight trades YTD, four wins and four losses. The wins have been big enough to generate a net win of 5.4% across the cycle so far.

Say you compounded those trades, taking the losses where they come and rolling the wins back into the next position. You’d be up 26% YTD. That’s huge.

And while it isn’t completely passive, it’s really just a matter of pushing two buttons: BUY and then SELL. Over and over. Whether you’re a member of 2-Day Trader or not, I recommend some kind of cash flow engine like this.

People say options are scary. We don’t take on leverage. We don’t waste a lot of cash trying to set up grand slams. It might not even be exciting! But the way we do it here, it definitely keeps us in the market moving forward while even Wall Street is dithering.