σ The Ultimate Trading Mind Map σ
➠ 3-Part Series
➠ Part 3
With all the recent market action, we took a little hiatus from this series
But we’re back w/our 3rd & final installment.
We touched on Idea Generation, then Risk Management.
Now, on to Trade Implementation & Psychology☟
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➠ BUT FIRST!
☞ If you haven’t read The Ultimate Trading Mind Map Parts 1 & 2, make sure you go back and do so. Then come back here. ☜
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➠ TRADE IMPLEMENTATION
σ Delta 1
You can go straight to expressing the trade via position that replicates the underlying 1:1
Or simply buy the underlying
This is the simplest thing to do
This is for longer-term/asset alloc style
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σ Diversification
Instead of going long or short one asset, you can split the eggs into different baskets
This helps improve the risk-adjusted return & further mitigate losses
➠ EXAMPLE
• You have directional view that equities will be going down in the near term
• You short a bit of $NDX & #DAX
• The former gets stopped out, the latter makes you money
• One offsets the other
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σ Portfolio Construction
This is about giving yourself limits
You could say no more than X% of your equity is allowed @ risk in any one asset class
Such as, your metals/miners allocation can not be higher than 20% to control your risk
If trying to minimize vols, diversification is key
But this all depends on the goals of your portfolio
Regardless, it’s pivotal to have a rules-based approach to asset class diversification
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σ Options Strategies
With options, you inherently have a strong risk/reward
The asymmetric profile (aka convexity) in options is unrivaled
The problem is that most people need to learn what options are & how to use them properly…
➠ EXAMPLE
• You maxed out your delta 1 allocation to #Silver
• But still fancy more exposure to the #preciousmetal
• You could add a small % into $SLV options w/the potential to turn into a big winner on an explosive move
• This is your kicker – your extra skin in the game
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σ A few of these well-thought-out “lottery tickets” can really turbo-charge a portfolio performance
Essentially making outsized returns out of a small debit
And the other good thing about using options this way is the ease of managing your position if it, say, triples in value
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σ You roll the strike up, extract the initial premium, & now have a free ride to play a further ride up if you so choose
Efficient risk management without much overthinking
Allowing you to maintain your risk/reward and run your winners
Now, on to the final, but every critical area of…
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➠ PSYCHOLOGY
σ You must be in tune with your emotions
One way to do this more effectively is via a rules-based approach
Keeping track of trades and backtesting ideas is also a great way to gain confidence
This kind of approach can help you find an edge as long as you stay honest with yourself
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σ The truth is that most of us don’t have that great an edge in the market
Some people are more good at tactical trades, feeling when the market may be overdone one way or another…
While others, like myself, have an edge that lies in the implementation of ‘selective’ trades
The ability to seek out, for the most part, asymmetrical risk-reward ideas
This is why I utilize and love #options so much!
And why…
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I want to help you learn how to use options overlayed on top of macro to mitigate your risk and maximize your returns!
➠ You can even do this completely free right now by following the link in my Twitter Bio and then entering code RV2023 at checkout
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➠ Want to ask me something about The Ultimate Trading Mind Map?
➠ Or maybe you want to discuss a trade idea?
Perfect!
➠ Come ask me during our OI Live on Twitter Spaces this Thursday
@ManLikeDebs will be our guest, so you know we’ll have plenty of trades to discuss!
See you there!
Cheers!
