I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Monday Money, I write about money management.
To call what I’m doing with my options trading is “running my own capital” might be taking it too far. But I nevertheless enjoyed this X thread from ArrakisGlobal.
I’ll never see an eight figure year — and that’s ok! I don’t need it.
Some guidelines pulled from the thread:
- Make any position a trade. Turn it into an investment only if it works.
- Stay liquid so that you can get in and out of investments when you need to. I.e., don’t put a bunch of money in a gated fund if you might need that money.
- If you’re facing a big life problem, take exposure down until you solve it. “Trading flows from a clear mind.”
- Limit your use of leverage.
- Manage to a number, not to a percent. “IIts irrelevant what your % return is when managing money in an eat what you kill system.”
- Implement risk tolerance and cut quickly to avoid large drawdowns.
What about buy-and-hold for savings?
I’ve been considering whether I should manage my entire portfolio myself. I’ve been using an asset manager for my IRA, and it is doing well, but not because he is doing much with the portfolio, but rather because I have kept my hands off it.
I don’t want to trade with that part of my money — I have a longer time horizon. But I would like to save the asset management fee. And I’m not sure I’m really getting much out of that setup anymore.
Another thread I came across on X suggests that are serious risks to U.S. large caps.
Ree cites the following as reasons for caution:
- High valuations, nearing records. “High valuations don’t crash a market by themself. But current valuation equals future gravity on future returns.”
- A new, hawkish Fed chair.
- Midterm election year cycle. “Since 1974, 10 of 10 have handed the S&P a drawdown, averaging -21%.”
- Bond yields are surging. This reprices debt and changes the economics of every future project.
- While oil prices have softened, there remain supply constraints and shortages “across a range of finished projects.” This might mean a second wave of inflation.
Ree concludes here:
I like that. “Prediction is a trap, preparation is a skill.”
The best lesson I’ve learned from options trading is not to depend upon my own analysis and predictions but instead to depend upon probabilities and accepting the risk that some trades will fail.