An Important Lesson to Avoid Careless Trading Losses
Welcome to Issue 004 of the Masters in Trading Digest.
We got something a little different for you today.
Today’s issue focuses on an important trading lesson written by Pablo Lucena on a topic rarely covered by online educators – and that’s synthetics.
In our member classes, held every Monday, we focus on risk way more than you would think. We cover position management and the importance of respecting “tail risk.”
Wikipedia defines Tail Risk, sometimes called Fat Tail Risk as “the financial risk of an asset or portfolio of assets moving more than three standard deviations from its current price, above the risk of a normal distribution.”
Said another way, “tail risk” is preparing for the worst possible scenario. All of us need to prepare to protect our “tails” because the unknown is, well… unknown.
POSITION MANAGEMENT: DEMYSTIFYING SYNTHETICS
This topic has come up a few times during the past few Friday Futures sessions, so why not share with the world? =)
Every Friday, Pablo Lucena holds a futures class for all Futures EDGE traders.
What is a synthetic Futures, Options or Stock Position?
A “synthetic” position can be used to obtain the risk profile of a desired position, while using a combination of underlying stock/etf/future and/or its options to do so.
This is something that we knew we needed to cover in-depth and that is why we had Pablo Lucena write a full post about it: POSITION MANAGEMENT: DEMYSTIFYING SYNTHETICS .
NEW YOUTUBE VIDEO RELEASED
WHAT’S GAMMA SCALPING?
Simple really, Gamma Scalping is trading the underlying stock around an options position.
When traders are long options, they are faced with Theta Decay as a risk to holding that option. Theta decay is the risk of time passing before your option moves “in-the-money.”
The opposite of Theta = Gamma… cool, huh?
Traders learn to Scalp Gamma to make back the lost Theta when holding a long options position.
Watch this Video, Gamma Scalping and the 3 Ways to Manage an Options Position
“”Position Management Gold” – is how Pete R describes this video
FINAL THOUGHTS
WHAT TO EXPECT IN THE NEXT MIT DIGEST
The next issue of the MIT Digest will be released Wednesday and share Stacy’s journey into Coins and Ethereum.
Are you still skeptical about Coins and Web 3.0? Do you not have the confidence to dive in yourself?
Stacy’s story comes from an excellent, sound perspective and we are excited to share this great read.
Keep your feedback coming into support@mastersintrading.com. We’re excited to share your feedback along with fantastic suggestions for upcoming issues.
Until Wednesday, trade smart and always manage your tail-risk.
Thanks for reading,
Jonathan Rose
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Masters in Trading Digest - Issue 4
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