Last Update: July 2021.

Like all traders, my approach has evolved over time. I discussed the lengthening of time horizons in Monday’s Tales of a Technician blog. Another factor that has shifted for me is portfolio design. As I’ve gotten older and acquired more capital, it’s become necessary to create core positions as the pillars of my portfolio.

What that means is I have positions that I hold regardless of market trends. I own them through bull markets and bear markets; through low volatility lulls and high volatility corrections. They provide an anchor that I can shift my exposure around.

Just so we’re clear, the alternative to owning core positions and holding them through thick and thin would be holding short-term positions but going to 100% cash at times. While that may be okay if you’re focusing on active trading with a smaller portfolio, I find it difficult to go entirely to cash and then have to redeploy a big pile of dough. It’s too tough on the emotions.

Admittedly, the portfolio of which I speak is kind of a hybrid. It’s not all passively invested, nor is it all actively traded. It’s a bit of both. But, it’s been a good fit for my personality and objectives.

How do I Pick a Core Position?

Because I want to own these core positions for the long haul, they are stock positions, not options. The easiest path is to use ETFs like SPY, QQQ, IWM, EEM, or the like because you don’t run the risk that you buy the next General Electric or Exxon Mobil. In other words, I want to have the utmost confidence that my core position will recover from every sell-off. That way I won’t lose faith during the depths of a bear market.

And, in case it wasn’t obvious, betting that a basket of the most well-run and well-financed 500 companies on the planet will recover from a downturn is a much more probable wager than that a single company will.

Let’s say half of the portfolio is in SPY, IWM, and EEM stock positions. What do I do with the other half? I deploy them into other systems like Cash Flow condors, Tackle 25, or the S.T.E.P. system. As the markets shift more bullish, I can augment my core long delta exposure by adding other bullish trades. When the market turns bearish, I can reduce my core long delta exposure by adding bear trades.

Thus, the portfolio returns are anchored to the long-term performance of stocks but enhanced by any active trading I do.

---

Financial freedom is a journey

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

---

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.