«Build a Moat.»
The idea of portfolio protection is simple. Take steps that ensure you don’t blow your dough. Drawdowns are inevitable. You will see your account value dip from time to time. But the size of the slide is altogether in your control.
Here are three ways to ensure you’re not exposed to an unnecessarily large crash.
1. Position Size
Position size appropriately. Don’t risk too much in any one position and don’t have too many trades going than you can handle if they all move in the wrong direction.
2. Stop Losses
Use stop losses and have an exit strategy. There’s nothing wrong with being wrong. There is something wrong with staying wrong so long that you dig a pit that takes you years to climb out of.
3. Portfolio Protection
Buy portfolio protection via puts and put spreads. You could purchase these on individual positions or be more efficient and do it directly on an index or ETF like SPX or SPY. As you live through multiple corrections and bear markets, you’ll learn which methods you like most.
Video Of The Day: How to Use Put Options as Insurance
Coach Noah explains what a Put Option is, how to and why you should use it as insurance.
Chart of the Day: Bitcoin Futures (/BTC)
Bitcoin is oiling nicely beneath the 50-day moving average. Is an upside breakout imminent?
Options Theory Blog
The Bear Lover System
A team member pitched me an intriguing options selling system. It involves super short-term options and delta hedging. Here’s my review.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Cash Flow Club Replay
If you missed last night’s webinar with Coach Greg Holmes where he talked about In The Money Covered Calls or would like to watch it again, check it out here.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
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