2023-08-17

managing positions without voodoo

a primer on managing positional trades

most important points:

1. you dictate your risk exposures, not the market
2. it doesn't matter how you got different exposures to the ones you want, just fix it.

basics:

1. you decide what exposures you want
2. over time, the market gives you different ones
3. you don't have to accept that! put the ones you wanted back on
4. when you don't want the exposures anymore, take them off

example:

• you short $10k of some shitco which has squeezed recently
• it goes up 100%
• now your short is $20k - twice as big
• if you wanted a $20k position you'd have put one on to start with
• so rebalance it back closer to what you want - maybe cover 9k - now it's $11k.

"yeah but, i'm realizing a loss..."

who cares?

you already lost that $10k before you covered.

your job is simply to mechanically rebalance back towards the exposures you want.

don't let the market dictate your risk exposures for you.

you can fix them any time by trading.

"trades" are just deltas on your exposures. they are mostly irrelevant by themselves except for the fact that they cost you money each time.

• put on the exposures you want
• when market gives you different ones, push them back
• when you don't like them anymore, take them off.

beep...boop.