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Rookie Blog: The Event Planner

November 5, 2020

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Hey Rookie Bloggers, wow what an event we just had, or are we having? We are most definitely talking about the US 2020 Presidential election. The drama that unfolded last night and that is still ongoing is reminiscent of a WWE cage match from the ’90s! We had blows from both sides with a lot of tough talk and we still don’t know what the deal is. The more I think about this deal the more I think it is just like a wrestling match, you got all the personalities and drama but we still don’t know who’s going to win? LOL

Regardless of the outcome of this election, we as traders need to be prepared for anything and there are a few very smart ways to make sure events like this don’t drive us mad and put us in the poor house. They are as follows…

REDUCE RISK! We need to take opportunities like this to reduce risk in any way necessary. The markets are open approximately 220 days every year and therefore we have ample opportunities to prosper in the markets and we don’t need to subject ourselves or our portfolios to anything less than optimal conditions. A few ways to reduce risk is by closing positions early, or closing part positions, such a closing the short leg of a spread trade and eliminating assignment risk. We can also close half our number of contracts to reduce risk to a more manageable level and of course, we can tighten stops on positions however there is possible gap risk and this needs to be monitored closely in times like these.

DELTA HEDGE! We can take a look at our entire portfolio and ensure that no matter what happens we will come out of it ok. Delta hedging is a great way to take the scariness out of the markets. With proper delta hedging we can get our portfolio close to neutral so that adverse movement one way or the other won’t end up crippling our accounts. We can delta hedge in a multitude of ways, we can collar core positions or we look at all the positions as a whole and throw on an options or futures hedge, whatever is required to get that delta to even.

THINK TIME! If one so chooses to trade during turbulent times then one must narrow the focus for fast moving markets. During these events the markets will move at speeds that you may not have experienced before and this can make you a pile and lose you a pile in short order and you must be prepared for this. Trading during these times one must be nimble, you must be willing to admit your thesis was wrong and quickly react and this may involve making an aboutface. Finally making sure that you are keeping a keen eye on your portfolio is always a good idea but it can be vital in times like these.

You can see there is a switch in mindset that is required when events like these present themselves and there are must-do’s that have to take place in order to protect one’s flanks! Being prepared is half the battle, being knowlegdable is the other half and tonight I will be doing a special youtube live event where we will look at practical applications of the above mentioned items.

Trade Well and Stay Safe,

Coach “Old Money” Holmes

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