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Tackle Today: Portfolio Protection Principles

June 30, 2021

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Nobody cares about your portfolio more than you.

Traders,

Over the next few Tackle Today messages, we’re going to discuss best practices for portfolio protection. In this case (and in almost all cases), when I say “portfolio protection,” I mean buying put options or put spreads as insurance for your portfolio.

Let’s start with a situation where you DON’T need protection.

Suppose your portfolio is full of short-term swing trades. You follow the STEP system and have stop losses placed on all your trades. What happens if the market crumbles? You get stopped out of each position until you don’t have any bullish ones left. Then, the pain ends. For example, if you have eight bullish trades with each risking 1%, your overall drawdown ends at -8%.

In this case, your stop losses provide all protection needed. There’s no need to complicate matters with buying puts if you don’t want to.

You can increase or decrease the risk of your portfolio by adding or subtracting bullish trades. Then, if you have a comfortable amount heading into a correction or bear market, you can rest easy knowing that your exposure is limited to the risk per trade x number of bull trades even if the market blows up.

Tomorrow we’ll look at a second situation where you don’t need to fiddle with portfolio protection.

#TeamTackle


Chart of the Day

Energy ETF Comparison

 In last night’s Coaches Show, we illustrated how to compare multiple ETFs in the same category. The energy sector offers three liquid ETFs for traders: XLE, XOP, OIH. Note how they’ve varied in performance over the past five years. For a more detailed breakdown, watch the Coaches Show recording.


Video of the day

The Queens Court


In this week’s edition of the Queens Court, the coaches bring separate trading picks for Coach Emily to review including Apple, Virgin Galactic, and Applied Materials. Will she accept the trade ideas or will she lop off the coaches heads?

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.

Trading Lounge at Night 8:30 PM EST

Join Greg Holmes tonight as he hosts the second of our Trading Lounges today.

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.

Trade Masters 7:00 pm EST

Join us for a special webinar with the coaches where they’ll analyze some trade setups.


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