It’s time to let go
It’s no secret that a lot of people made home improvements in 2020. With many of us forced to work and go to school from home people had to create space around the house. That either meant additions to the home or converting rooms from one thing to another. I can also imagine the amount of reorganizing that might have happened out of sheer boredom or necessity during the lockdown months. Even without a global pandemic decluttering our home is an activity we all engage in at one point or another. Getting rid of stuff and isn’t always easy though. We are guaranteed to come across something of sentimental value that stirs up emotions and memories that halt us from putting that item in the trash pile. Everyone else can see that is exactly where it belongs except you. Eventually, the trash gets taken out, and voila! You have a clean closet, garage, basement, etc. I especially love watching the remodeling shows on TV with the before and after shots side by side. Closets are my favorite. The shoes are skillfully placed on the shoe rack and clothes hung by the occasion. Work clothes, casual everyday wear, the little black dress for those special occasions all within reach and easily accessible.
As a trader, the same organization and declutter needs to be done in your portfolio. Envision with me if you will that you have that newly redesigned closet where everything is in order except this time we’re designing your trading closet. Cash flow, growth, and speculation are your compartments and you have to clean out whatever isn’t working and keep what is. For example, in the growth portion of your account let’s assume it’s a retirement account allocated to use the covered call strategy but have mutual funds or stocks that were rolled over from a 401k. If those particular instruments do not have options, you are unable to do covered calls so you have to decide to get rid of them and find better candidates that do.
How many cash flow strategies do you need in your portfolio to meet your goals? Probably not as many as you think. Naked puts, covered calls, bull puts, and bear calls would probably cover it. It’s like asking me how many pairs of black heels I need! You would easily tell which shoes I wear the most just by looking at them because some shoes are more comfortable than others which means I don’t need that many. Speculation really can be as simple as trading stock. It’s easy simple to automate and execute without the complexity of dealing with the volatility of options.
Think of it this way, we all have certain clothes and shoes, belts, scarves, hats we like to wear all the time. They are comfortable and they fit well, and you can just relax when you wear these outfits. We wash them and we fold them and put them away and repeat this cycle weekly or monthly. If you’ve designed your portfolio to be mainly Theta strategy, then that needs to match with the trades you have in the account. These should be your primary strategies on a constant rotation every month with a rinse and repeat cycle. If the secondary is Delta trades then that also needs to reflect on those strategies such as stocks, long call, long put, bear put and bull call spreads.
Organize your playbook to match your style of trading. There is absolutely no rule that says you must know every strategy, indicator, and pattern to become a successful trader. We are all guilty of cleaning out our closets and finding an outfit still with the tag-on that we bought and never wore. Remove the clutter and get clarity on what it is that you absolutely must have and what you don’t need.
Ladies join me tonight at 8:30 for our monthly Women in trading webinar. See you then!
Emily Muiruri was born and raised in Nairobi, Kenya before her family moved to the US and settled in Maryland, Emily began her trading journey in January 2015 after 17 years of Property Management in the Self-Storage Industry. Like many new traders, Emily started off with directional trading strategies such as long calls, long puts and very little in cash flow strategies. Over time that has changed and now her core trading strategies are cash flow based such as are Covered Calls, Naked Puts, and Iron Condors. Though she is still a student learning and enhancing her trading skills, she has a strong desire to teach women to take control of their finances and become traders. Writing blogs is one of the ways she’s is looking to spread the word and get more women involved. Emily knows that with the right education and trading system women can be successful traders.
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