lystn

Hey everyone, Kirk here again and welcome back to the daily call. Today, we are going to talk about this concept of core portfolio theory for options traders and really asking the question, “Is it still viable or frankly, something that’s useless?” What is core portfolio theory? You might have heard it from some other people out there and that’s basically this idea that you should have a core portfolio on at all times. That can be comprised of futures contracts. It can be comprised of synthetic options positions. It could be comprised of stock in and of itself. You could be long gold because you love gold or long bonds because you want to be long bonds. But something that is your core portfolio and then you trade around that core portfolio. I understand all of the arguments for a core portfolio. I just think it's honestly inefficient use of capital to some degree unless you're doing things mostly synthetic. My biggest rub with it is that I truly believe in most cases, that stock is really inefficient for traders and you can replicate stock positions or get into synthetic stock positions with much less capital, therefore leaving you cash available to adjust or hedge or counteract whatever you’re seeing in the market. I still think that it’s viable if you are trading less often. Having a core portfolio probably is more appropriate if you don't have the ability to trade, if you don't have the ability to use like the auto-trading software that we’re rolling out. If you don’t have that ability, then yeah, maybe having a core portfolio that's on, that gives you some study cash if the market goes up or goes down or gold goes up or bonds go up or whatever your portfolio ends up being comprised of, sure, it might help out. But I think if you have the ability to trade more often and more frequently, you can easily get into those same core positions and adjust them along the way versus just planting your flag in the sand and saying, “I'm going to be long EFA from here or I’m going to be long gold from here.” Why not trade option contracts around that? You can still be long and trade contracts and still adjust along the way, so that if you're wrong, you still have an opportunity to make money. I think it’s something that's an interesting topic. I’m not going to say… Totally, I don’t think it’s viable, but I’m not going to say that I think it's the best use of capital and time as long as you don't do everything with equity positions. Hopefully that helps out. As always, if you guys have any comments or questions, let me know. Until next time, happy trading!