I mean, do I really know my risk?

Stocks and Futures traders like to talk about how they use stop-loss orders to define their risks, and that’s smart.

A lifetime ago I managed a small, independent hedge fund that traded commodities with a trend-following strategy. This strategy entered positions that I’d attempt to hold for weeks or months (if they were working).

Every position I had on had a resting stop-loss order working in the market, giving me comfort that I knew the most I could lose if I was wrong.

All that comfort I was enjoying changed one day after a trip to my clearing firm’s office in downtown Chicago.

I sat down with one of the firm’s risk managers for a simple “get-to-know-you” chat. He was curious about my trading and just wanted to get to know me a little better and see if there were any ways in which he could help me get to the next level.

We got into the weeds of my trading strategy and he was nodding along in agreement that he was in favor of what I was doing and he thought the returns I was earning were impressive and better than average for accounts of similar size with that firm.

When we got on to the topic of how much risk I was taking in each position, I had my riff on position sizing and trailing volatility stop-loss orders ready to rip.

But then, mid-speech, he interrupted with a show-stopper: [Read more…]

If you would’ve told me a few months ago that we’d see a large crypto exchange (FTX) go bust and later a number of big banks become insolvent and collapse to zero, I would’ve laughed you out of the room if you followed up with: “…and bitcoin will rally.”

I mean, there is no way I would’ve agreed with that sentiment.

Thankfully, I don’t get paid for my opinions. Because the market couldn’t care less about what I think.

The strength in Bitcoin (and crypto in general) has truly been a sight to behold in recent months and in particular over the last few weeks.

The poster child instrument to play bitcoin in the equities market is via Microstrategy $MSTR. For those with their head in the sand on all thing bitcoin, this software services company has transformed itself into essentially a bitcoin ETF, having invested all of its working capital into bitcoing, and taking loans to leverage into even more bitcoin.

We’ll leave the discussion on whether or not this is crazy to another blog post. But for now, MSTR offers us a great way to participate in continued strength in bitcoin and we’re going to do it with a defined risk options spread. [Read more…]