REVEALED: Why You Should Embrace Volatility

by Options Sensei

Many people equate volatility with risk.  Or, conflate risk management with risk aversion. Both views would be wrong and detrimental to your ability to invest or trade profitably. 

In all my writing, I’ve repeatedly emphasized the importance of risk management; be it through position size, having predetermined entry and exit points, and applying hedges.  This doesn’t mean that I’m avoiding, or being risk-averse.  Risk, and the possibility of loss, comes part and parcel with this business. To repeat, there’s a difference between being risk-averse and risk management — avoid the former and implement the latter. 

Get in on this Special $19 Options360 Concierge Trading Offer to Ensure You DO NOT MISS any profitable trades!

One should take a similar view of volatility. Volatility in and of itself is not risky.  In fact, it represents opportunity.  Simply put, if prices didn’t change there’d be no possibility for profits. 

This doesn’t mean going headlong or blindly into the most volatile asset classes.  The level of risk and volatility to embrace is your personal choice, depending on temperament, financial situation, and goals.  I’ve discussed how I generally avoid the momentum or meme names and stick to larger, more mature, and generally-profitable companies. This is basically a function of my trading style where I use spreads, and make adjustments to harvest premium through time decay and grind out singles rather than looking for home runs. Basically, I’m more comfortable being a HIMI (Happy I Missed It) trader than one driven by FOMO (Fear of Missing Out). 

[SPECIAL OFFER] Try out the Options360 Concierge Trading Service for the low introductory rate of $19!

One way to embrace volatility is to think of it as the school principal who forces everyone to behave.  Or, at least be thoughtful about the size and nature of risk we’re undertaking. Are you willing to assume the consequences if you’re caught doing something “wrong?” 

If not for volatility, the fluctuation and drawdown, the pain of seeing dollars on a screen disappear, then premium returns over the interest rate on a checking account wouldn’t exist. That’s where the term ‘risk premium’ comes from. If there is no volatility there is no risk. No risk, no premium, or potential for profits.  

[LAST CHANCE] Try out the service that’s delivered profits to its members EVERY SINGLE YEAR since starting — the Options360 Concierge Trading Service.

The post REVEALED: Why You Should Embrace Volatility appeared first on Option Sensei.