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My Investment Framework.
The Top Down Investing Approach
When people ask what is my strategy the best way to explain it is like this: I run top-down approach to trade cross-asset, long/short across any time frame. That means I look at technically-driven, mean reversion, value and event-driven ideas; I don’t limit myself to “one strategy”.
These are my core views on trading & portfolio management
Alpha is generated cross-asset classes long and short
Macro, Fundamentals & Technicals provide a clear and repeatable framework
Assymetryic idea generation is a key component - I skip most ideas unless the juice is worth the squeeze
Trade structure is just as important as the trade idea/thesis - without the structure of the idea the actual idea is worthless. I write about it here.
This allows me to trade 1-5 days at a time or to look at holds anywhere from 1-12 months in time - in short, since I am a money manager I build portfolios and those portfolios use both event-driven trading and long term holds - I discuss that here.
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The Three Strategy Sets I Deploy
I really just run 3 core strategies
Momentum Trading: Stocks & Directional Options
Swing Trading ETFs/Sectors: Stock and Deep In The Money Options
Value/Turnarounds: Long Equity & LEAPS
My approach is that it doesn’t matter what asset class or what market environment it is that there is always a way to generate P&L.
I’m not a day trader but rather an analyst. I care about one thing: making the number on the screen bigger while producing risk-adjusted returns meaning I believe in managing a portfolio with multiple strategies.
I’ve studied hundreds of investment approaches in my career and I don’t think one is necessarily better than the other (Value, macro, debt, short-selling etc) - it’s all the same to me because the framework allows for it.
This is the same framework that was instilled to me in 2009 as a prop trader and to be more clear, that training was almost identical to that of many of the Market Wizards like:
Bruce Kovner (click to read)
And more
Idea generation matters and having a never-ending arsenal ideas are key for me hence why we produce The weekly LongVol Report PDF (since 2020) - We track ideas long/short that are technical ideas, fundamental, macro…you name it.
I don’t follow JUST technicals or JUST unusual options flow we incorporate all of it to have a well-rounded idea generation process.
It looks like this visually 👇
The final step in ANY idea is a technical/market timing overlay to understand where we want to be buyers and sellers ahead of the trade.
1. Momentum Trading
Momentum trading on high beta equities or Index ETFs is a go to strategy I’ve run for over a decade and it’s relatively straight forward because it simply follows the following framework:
Order flow/Levels/Price Action (in no particular order)
Following the trend or looking for a correction on a trend
High beta stocks & Index ETFs ( ETC)
Usually I trade the equity with long calls and long puts, no spreads etc.
We track 10-15 Momentum ideas each week and they are usually the same names 90% of the time. This makes for an easy watchlist that is rinse and repeat and requires little balance sheet or fundamental analysis.
You can get 2 Free Copies of The LongVol PDF Report to see the approach here.
2. Swing Trading
Swing Trading on ETFs and select stocks that are are experiencing positive tailwinds, bullish trends and other catalysts. I track about 15-25 names at any given time and wait for triggers to buy them. These trades last anywhere from 7-90 days on average and are used with shares or +90 day (or longer) Deep In the Money Options - DITM.
You can get 2 Free Copies of The LongVol PDF Report to see the approach here.
3. Value/Turnarounds/Core Holds
I buy turnarounds, value ideas and other special situations where there is some corporate or regulatory catalyst that causes the company to (at a minimum) at least have a potential +30% move higher. If there is not the potential for at least +30% or more I pass on the idea - this is discussed weekly in the article of the week and some of the recent ideas in past years of this have been:
(+80%)
(+50%)
(+90%)
(+75%)
(+40%)
And many more.
The Research Process is Top Down:
What does FCF look like? Where is it going?
What are the debt levels and when do they mature?
What are net margins? Are they increasing/decreasing?
Who is running the company? Interim CEO, CEO with a track record? How will change be affected?
What is the sentiment/story of the company and does it add up with the financials/balance sheet?
Again, just some of the questions I ask - not all, but some…it’s just a process of deducing things as a detective would trying to solve a case.
Usually the research/deep dives start ahead of time and we track them until we get a catalyst/trigger to enter and this is what it looks like visually 👇
Market Timing/Price Action
Market-timing/order flow/price action play an important part to any idea generated in 90% of the cases - some ideas I don’t care because I am buying the balance sheet of a company ( like or as examples) so timing the idea doesn’t matter to me because we are long-term holders.
In the other 90% of the time market timing and technicals matter because they provide me with:
Areas of interest to watch for entries (triggers)
Potential targets (so I can asses if the risk is worth it)
Ability to be picky in what ideas I want to trade
I use Fibonacci, price levels and order-flow to analyze the charts.
You can learn more about that in the Sunday Market Timing video that we put out by simply just watching and listening - subscribe here.
Options/Shares/Structure
Most of the time I buy the equity and use options as leverage by just buying them directionally. 75% of the time I use LEAPs and DITM options the other 25% of the time they are shorter-term options.
I never sell spreads or run any non directional strategy for one reason: most of the time I am buying a company that I expect to rally hard and I want the upside.
When I am short-term trading momentums strategies I just buy the shares or the shorter-term options and scale out.
Recap of Framework
This is a model based around running a lower volatility portfolio which I do for accredited investors at my firm. In my personal accounts I will get more aggressive with shorter-term trading but for the most part I am after compounding returns YoY so don’t mind to hold positions for a year or so while tactically trading short-term momentum.
If you are using a smaller portfolio then maybe the Momentum approach is best for you but you’ll have to figure that out.
The easiest way is to get a free copy of The LongVol Report here and/or subscribe to this Substack so you can:
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This article is presented for informational purposes only, is an opinion, and is not intended to recommend any investment, and is not an offer to sell or the solicitation of an offer to purchase an interest in any current or future investments. Any such solicitation of an offer to purchase interest will be made by a definitive private placement memorandum or other offering documents.
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