The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be answering the question, “Does unsystematic risk matter anymore?” First, let's read a description of unsystematic risk. Unsystematic risk is a unique specific risk to a company or industry. That’s also known as nonsystematic risk or specific, diversifiable or residual risk in the context of an investment portfolio. Unsystematic risk can be reduced through diversification. The idea around this is that if you have two different companies, say McDonald's and Apple, you can pretty much diversify most of the risk away from owning those companies by investing in other companies that are non-correlated to Apple and McDonald's, maybe a utility company, maybe an oil and gas company, a financial services company. There’s a lot of ways that you can diversify around it. The question that everyone is asking though is, “With the advent of indexes and a lot of these ETFs, should it matter what unsystematic ris