#Risk management
6 public posts on this topic.
Theory
Backspreads and Naked Selling — The One Point I Look for First on a Payoff Chart
Structures with a big payoff have a spot where the chart dips deepest. For a backspread, that hole sits at the long strike. For a naked short call, there's no floor at all. I walked four structures all the way through with example numbers.
Theory
I took the certain gain instead of the maximum one
Price was bouncing off the low, the position had already traded above 10 and come back, and the full debit was on the table. Watching how fast price was walking past the center, I closed two hours ahead of my own rule.
Theory
I lowered the win rate I need from 55% to 42% — by changing the average loss, not my hit rate
In options the winning side is capped by the contract. The losing side is the only one I set. So I stopped working on maximizing gains and went after the average loss.
Theory
A 9-to-1 credit spread, and what it actually asked for
A 10% breakeven win rate. On the numbers alone it was the best strike on the board. It was also the one strike that bet on distance rather than direction.
Record
Three years on, I expanded a rule from my own book
The 1:3 rule was a standard for buying. I built the one for selling.
Record
I debated risk rules with my AI, and got a better rule
Billie raised an objection, I pushed back, and then the real question appeared.
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