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

Hey everyone. This is Kirk here again from optionalpha.com and welcome back to the daily call. Today, we’re going to be talking about why you have to stop discounting the importance of variance in your portfolio. The reality is that when a lot of people get started in trading, what they often do is they often over-allocate. This is nothing new. This is something we’ve talked about at nausea before. And the trouble with over-allocating is that when things go right, it gives you a false sense of false positive that you're doing the right things. You allocate let’s say 50% of your account to a trade and the trade goes really, really well and for that reason, you think, “Okay, great. Now, I have to allocate 50% or whatever the threshold is to all of the trades that I do moving forward.” The truth is that when you do this and you get those false sense of positives, you eventually run into a string of losers. Murphy's law implies that when something bad could happen, it probably will go happen and many of you guys