1)Own no more than 20 *active* option positions
2)Own no more than 40 option positions total.
3)1% position size per option with 5 possible exceptions.
4)Those 5 exceptions may all be 2%. max 2 may be 3% and max 1 may be 4% positions.
5)Target max 50% of stock positions ~5 positions of 10% or less.
6)10% income position that is always on except sold to avoid margin.
7)Remaining capital with 1-5% in asset allocation options. (commodities, currency/cash, stocks/short VXX, bonds/income) plus possible 2% hedge.
8)Only take a trade where reward is 3 times the risk or more.
9)Monitor breadth to add more when it’s oversold or when it makes a strong breadth thrust off of oversold, add normally when it’s not overbought, and add proportional to rate of selling or slower when it’s overbought or trending down from overbought (until oversold signal).
*A position that falls 75% below it’s original value you basically write off as a loss.
-Watchlist is developed through OABOT’s top 400 and manually filtered from there to usually 20-60 names.
-Import watchlist into a spreadsheet with suggested stops and targets and current price
-Reward/risk will automatically update once it’s in the watchlist.
-Trading rules for entry that must follow the above portfolio rules and also an entry checklist which should also be using triggers.
1)As stocks are bought, input the stop, target, entry price into spreadsheet.
2)Since many of you are already trading, don’t worry about importing a large list of current holdings… just update the next trade until you phase out the old trades.
3)Stock must be below stop 5-10 minutes before trading close to trigger a sell.
4)Stock above target has a separate rules of waiting for the candle to close below prior candle low or failing to close above prior candle high Sell before the following candle’s close.
5)Which timeframe you use when stock is above target depends on condition but in general: With investments you may use monthly or weekly chart. With stock trades and options that have more than a week remaining til expiry you use daily chart. on options expiry week you might use a 1hr or 4hr chart. 1 day before options expiry you may use a 30 minute chart. On options expiry day you may use a 5m chart.
6)Generally update and check spreadsheet every hour. Also monitor watchlist stocks for purchase. On options expiry day check them every 10-15 minutes. One trick with that is if the stock is higher than the last time you checked, you don’t have to look at a chart.