Options Trading: What is the Correct Strategy?

Outline

Introduction

  • John Napolitano introduces himself as an options trading instructor with over 20 years of experience. He has institutional trading experience and teaches average investors how to trade options successfully.

The Issue with One Strategy Fits All Approaches

  • Many people try to come up with one “game changer” options strategy that works in all market conditions. However, the market is constantly changing and a single strategy will not always work.
  • Strategies that produce huge returns in a trending market often stop working when conditions change. Following gurus who promote one strategy can lead to giving back all profits when markets shift.

The Basket Approach for Consistency

  • The key is having a flexible strategy that can adapt to changing markets. Napolitano uses a “basket approach” learned from institutional trading.
  • With the basket approach, multiple trades are placed simultaneously, both long and short. The proper options strategies are selected based on current market conditions.
  • This approach allows you to be consistent instead of relying on one strategy. No single trade matters more than the overall basket.

Available Resources to Learn the Basket Approach

  • Top Trading Pros offers education through videos and an eBook to learn the overall strategy.
  • They also provide weekly coaching and a Discord community to get trade alerts, discuss ideas, and learn from mentors. This is critical for successfully implementing the basket approach.

Applying the Basket Approach in Current Markets

  • With the NASDAQ breaking its uptrend and bouncing around, we are in “nowheresville.” A sideways market strategy is needed.
  • Traders who lack flexibility and only go long will get frustrated. Coaching is important for navigating these market conditions.

Conclusion

  • The basket approach provides consistency in changing markets. Check out Top Trading Pros for more on implementing this strategy. Managing risk is critical.

Summary

Introduction

John Napolitano starts by introducing himself as an experienced options trading instructor who has over 20 years of experience in options trading. He explains that he has worked on the institutional side of trading and now leverages that experience to teach average retail investors how to trade options successfully. The goal is to share his extensive knowledge and real-world expertise to help regular people learn how to trade options profitably.

The Issue with One Strategy Fits All Approaches

Napolitano explains that many people try to come up with a single “game changer” options trading strategy that purportedly works in all market conditions. He warns that this is an overly simplistic view, because the market is dynamic and constantly changing day-to-day and even hour-by-hour. Therefore, relying on just one strategy is generally not realistic or prudent. Strategies that produce huge returns during a prolonged trending market often completely stop working when market conditions inevitably change. Napolitano cautions that following trading gurus who aggressively promote one specific strategy can lead retail traders to give back all of their profits when the markets shift, which they always do eventually.

The Basket Approach for Consistency

Given the ever-changing markets, Napolitano advocates for a flexible trading approach that can adapt to different market conditions. He uses what he calls the “basket approach” which he learned from his time trading in institutional roles. With the basket approach, you place multiple trades simultaneously that include both long and short positions. You then selectively utilize the proper options trading strategies for each position based on current market dynamics. This provides the consistency that eludes most retail traders, because you are not reliant on any one strategy or trade. Losses on certain positions can be offset by gains on others within the diversified basket. Napolitano stresses that no single trade matters more than how the overall basket of trades is positioned.

Available Resources to Learn the Basket Approach

Napolitano states that his company, Top Trading Pros, offers educational resources to teach people the basket approach. This includes videos explaining options mechanics and strategies, as well as a free eBook that provides an introductory overview of the approach. However, he emphasizes that education alone is not enough. Napolitano explains that Top Trading Pros’ coaching program is the most critical offering, providing weekly coaching sessions and a Discord community. This allows clients to get specific trade alerts, discuss ideas with mentors, and learn directly from Napolitano how to successfully implement the nuanced basket approach in real market conditions. The Discord community support network includes traders at all experience levels.

Applying the Basket Approach in Current Markets

Given recent market volatility, Napolitano provides an example of how the basket approach should be applied in current conditions. With the NASDAQ breaking its long-term uptrend but bouncing around sideways, he says we are in “nowheresville.” In these choppy markets, traders need flexibility to go both long and short with a sideways trading strategy. Those who only buy calls will become frustrated. Napolitano reiterates that coaching is vital to navigate these markets successfully using the basket methodology.

Conclusion

In conclusion, Napolitano emphasizes that the basket approach provides consistency for traders in constantly changing markets, while one-dimensional strategies falter. He directs people to explore Top Trading Pros for further information and training on implementing the proven basket methodology while managing risk.2

Hey, everybody. How are you? John Napolitano here with you on this fine Thursday morning. I hope everybody’s doing great. I’m a top trading pros. I am the An options instructor here. I’ve been doing options trading for about 20 plus years. For those of you who don’t know me, I have institutional trading experience.

And now I take that experience and try to teach the average investor how to trade successfully in the options market. One of the things I want to talk about in this video is basically what’s the best option strategy to use. And a lot of people come to me and ask me, well, I see all this stuff on YouTube.

I see all this stuff on television or whatever , and on the internet. And basically I see a lot of people out there that try to come up with one strategy. That’s kind of a game changer. , one’s kind of, , one size fits all type strategy. And I’m here to tell you, unfortunately, that that is not the way you trade options.

The market changes dynamically every single week, every single day, even. And you have to have a strategy that basically molds what the market is telling you. I have a strategy called the basket approach, which I’ve learned over my years working on the institutional side, and it is the only way I trade options.

It’s the only way where I feel you can be consistent. I think the key to the game when it comes to options trading or anything in life. Is consistency and some of the strategies that I see on YouTube, some of the strategies that I see people talk about, they work very well. They might work very well for like a week or two or a month or two or even a whole year.

If let’s say the market’s going in one direction for the most part, those strategies work fairly well. When people talk about, oh, I made a thousand percent or I made all these crazy return numbers, it doesn’t surprise me if they are doing one thing and the market is trending in one direction. But unfortunately, what happens is the market changes and that could happen in a week, that could happen a day, that could happen, , at some point, any time, and then that strategy no longer works.

And then that individual made all their money , just from kind of selling their strategy or whatever you want to call it. And then you end up. Giving back all the money that you made. So I’m here to tell you that you can be consistent. , I don’t know about no thousand 2000% and all that ridiculous amount of returns that people guarantee.

But what I can tell you is that if you follow my basket approach, which I’ve developed over the years, here’s the deal. Not one single trade is going to matter, as far as what you’re going to be talking about, you’re going to be trading multiple things at the same time. You’re going to have, let’s say, in the theoretical basket of 10 different names, you’re going to be both long and short at the same time.

You’re going to select the proper option strategy selection for the market conditions that are in front of you. So does sometimes a straight call or put make sense? Absolutely. , does sometimes a vertical spread make sense? Absolutely. Sometimes a vertical credit spread makes sense. Sometimes a diagonal spread makes sense.

Now, I know there’s a lot of strategies out there. I know a lot of people kind of their head spin about this stuff, but I have a step by step approach that I’ve developed over the years that allows you to select the right strategy at the right time in the right environment. So at Top Trading Pros. We basically have a program that allows you to do this.

We don’t just sell education. We do, we do that also. But we also one of one of the primary things we do at top trading pros is coaching. Coaching is extremely important in this type of environment, particularly. Understanding option strategy selection and which one to use the right time is paramount to success.

So that’s what coaching is all about. So we offer education. You can check out our website. You can check out these YouTube videos. We have plenty of free content on toptradingpros. com. If you want to just get to know us a little bit and see what we’re all about. , we also have an ebook that’s for free.

If you want to sign up and give us your email address. We’ll send you a newsletter with updates every single week, as well as a free ebook, which will get your feet wet. It’ll get you familiar with our overall strategy,  then on top of that, we offer education. So you can, you can, if you, if you want to, just watch videos.

If you want to kind of learn what an option is, what are the Greeks, what are the different strategies and all that stuff. We offer that as well. , on top of that, we have a coaching program, which is our, which is our main, which is our main thing. We have weekly coaching, , from myself, as well as we have a discord channel where we give trade alerts and we discuss ideas in a, in a like minded community of people like yourself.

So we have all levels of, all levels of option traders can benefit from this. We have beginners who are learning from. From myself and some of the more advanced traders, we have advanced traders who just want to up their game. Maybe they, maybe they struggle with consistency and they’re unable to figure out what they’re, what exactly is going wrong.

Nine times out of 10, I’ll share this with you. Nine times out of 10, it has nothing to do with your trade plan or your risk management. What it really has to do with is you’re not paying attention to the overall market. You’re not paying attention to your basket, how one stock maybe is related to another stock and so on and so forth.

And you might be either too long or too short. If you combine that with poor risk management and not the right planning , consistency is a very challenging thing for a new trader to have without proper coaching. So that is what we offer at Top Trading Pros. In an environment like this, I’m going to leave you with this thought.

I’m looking at the markets right now. And basically, if you look where we are, what I’m telling my students is this, and I’m going to share, I’m going to share this with you. , the NASDAQ basically, I have the cues up right now, but basically you have this huge uptrend from the beginning of the year that has now been broken.

You now have this move down that we’ve had, and now we have a little bit of a bounce today as I’m, as I’m, as I’m recording this. So right now, I like to call this Nowhere’s Bill. And when you’re in nowheresville, you have to have a strategy that matches that the market probably will not bounce to new highs.

We might bounce sideways for the rest of the year. And if you don’t have a sideways strategy in place, if you don’t have that type of flexibility where you’re able to go long and short at the same time and do some sideways stuff also, you are not going to be successful. What’s going to happen is you are going to get frustrated.

So especially in the environment that we’re in right now. It is more important than ever to get the right coaching and the right, , and the right mentorship. And that’s what we offer at top trading pros. So I hope this video is helpful. Be careful out there, manage your risk, check out our website, top trading pros.com, and you will see exactly how that basket approach works. Okay. So have a wonderful day, everybody. Take care.

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