June 16, 2019

It’s Allocation! Allocation! Allocation!

When I talk to new (and even some veteran) traders when they are struggling with their trading, invariably one of the issues that they have is allocation.  Options traders should not characterize themselves as a “5 lot trader” or a “10 lot trader” as a futures trader may.  Futures traders typically manage their risk by ticks.  For example, they try to take 4 ticks out of their winners to risk 2 ticks on their losers.  That’s because the tick size is static.  That is not the case in options.  That is why you have to manage your CAPITAL AT RISK.  Click the video below as I discuss this in more detail.

Follow me on Twitter @MikeShorrCbot

 

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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