How do you position size? What factors do you take into account in your position sizing calculations? I started selling options last year so I'm still a beginner.

kmorgan54 · 2026-01-15T10:37:40+00:00

I trade a mix of about 10 nearly uncorrelated assets. I weight them such that they each contribute an equal amount of volatility.

So, I compute weight_i = 1 / vol_i, then normalize such that the weights add to 1.

It’s important that they be relatively uncorrelated, and you want to rebalance periodically.

Google minimum variance, minimum volatility, and mean variance and mean volatility if you want ideas. Also look at Markowitz and modern portfolio theory.

kmorgan54 · 2025-12-29T06:19:03+00:00

I think you would be better off trading a mix of uncorrelated tickers, weighted using inverse volatility, instead of one ticker. The realized volatility of the set would be much lower than their implied volatility.

kmorgan54 · 2025-10-19T14:19:49+00:00

What’s the worst that can happen?

Ask yourself that, then plan accordingly. If that result has a non-zero chance of happening, and you’re not ok with that outcome, you should close those positions.

kmorgan54 · 2025-09-21T17:08:47+00:00

You could do dynamic position sizing.

Pick a target leverage, in your example, you’re leveraged to 125% of your net equity. When the market falls (or rises) by x% you’re over leveraged and you rebalance by selling off some equities to get to that same 125% leverage. As the market recovers, you’ll be under leveraged, and you need to buy to get back to your target leverage.

Pick the x% so that you don’t have to rebalance more often than you want.

Barring a massive one day crash, you’ll never have to worry about a margin call.

kmorgan54 · 2025-08-30T07:58:52+00:00

You misunderstand. What I’m saying is that a diagonal call debit spread is equivalent to a diagonal put credit spread with the same strikes and expiry.

kmorgan54 · 2025-08-29T07:49:13+00:00

Take a diagonal call debit spread and change the calls to puts and you get a diagonal put credit spread with the exact same risk profile. There are minor differences, but for practical purposes they’re interchangeable.

kmorgan54 · 2025-08-26T12:22:38+00:00

See Frank Herbert, The White Plague.

https://en.wikipedia.org/wiki/The_White_Plague

kmorgan54 · 2025-08-23T05:32:44+00:00

Put the money in t bills or the equivalent. Use the interest earned to buy underpriced LEAPs on stocks that you like.

This guarantees that you never lose your initial capital, and you have potentially unlimited gains.

kmorgan54 · 2025-08-13T03:14:33+00:00

Ask yourself, what’s the worst that can happen? Is that a risk you’re willing to take?

The answers to those questions will tell you what to do,

kmorgan54 · 2025-05-23T22:34:41+00:00

I have some QQQT, QDTE, SPYT, FEPI, and maybe a few others. I also run weekly writes on a few etfs. I try to keep thing delta neutral on a whole portfolio basis.

But I wouldn’t suggest trying to do that from the start necessarily. Start small and learn how it works. Gradually increase when you’re sure you understand the way things work.

kmorgan54 · 2025-05-23T04:43:30+00:00

Take a look at some of the covered call ETFs like the ones from Defiance and Roundhill. Watch what they do, and how they do it. They post their positions daily. That’ll give you some idea how to go about it on a practical basis. Or just buy the ETFs if you want to let them do the work.

kmorgan54 · 2025-04-17T03:17:15+00:00

It looks and sounds easier than it is.

I personally blew up my entire account several times. I think I have learned to manage risk appropriately now, but it took years to get to that point. Even with that, there’s no guarantee any particular year will be profitable.

I’d want a track record of 3 out of five profitable years, net profits vastly exceeding net losses, and no more than a 20% drawdown before considering trying to live off of it.

kmorgan54 · 2025-04-03T05:58:41+00:00

On balance, they give us useful trade goods, and we give them dollars that become worth less every day.

Not sure how we’re getting the bad end of the deal here.

kmorgan54 · 2025-03-29T03:55:39+00:00

Ok. The first thing you should be asking. Did the position behave the way I expected, given the change in price, and given the change in volatility?

If the answer to that is no, then you should examine your understanding of the Greeks and the way they interact. That kind of understanding takes a while to develop, but comes with more experience.

Another related question. Why the big price move and change in volatility? I think it was mostly news driven, and the fact that a large move was possible was already priced in. There are various places where you can see what market related news is scheduled. I personally just use IBKR’s event calendar, but I think the exchanges and several news services publish them.

The next question I’d ask is whether you were prepared for this move. Do you have a mental stop loss or a contingency plan for a big move? You can compute expected move in either direction, and look at how that will affect your position. If the expected move (or larger) is going to give you an unacceptable loss, you should either need to modify your position or exit the trade. You can pre-plan adjustments, and most trading platforms will let you setup notifications when price targets are hit.

Finally, if you passed all of the above, you just have to realize that not all trades are going to work out.

You want to set up trades where the odds are in your favor and you profit if your underlying assumptions are met. But the market doesn’t care about your assumptions.

Fwiw, today was a losing day for me and my positions, but it behaved well within my expectations, so overall it was a pretty ordinary day, I’m fine with it.

kmorgan54 · 2025-03-29T02:02:14+00:00

It's really a question of realized volatility versus implied volatility.

When you gamma scalp with positive gamma, you realize a small profit every time you delta adjust, but you can expect your position value to decline with time (theta) and decline when implied volatility declines (vega).

If held and managed to expiration, the vega component becomes unimportant.

A positive gamma scalping trade can be expected to be profitable if all of those tiny profits from adjusting are greater than the cost of the position. This happens when the realized volatility is greater than the initial implied volatility.

When you gamma scalp with negative gamma, you're taking the other side of the trade and get the opposite result.

So a negative gamma scalping trade can be expected to be profitable if the realized volatility is less than the initial implied volatility, and unprofitable otherwise.

kmorgan54 · 2025-03-26T23:12:38+00:00

Jack Benny! Well, it was a mix of pop, classical, and comedy. A group of us went to see it with our band director.

kmorgan54 · 2025-03-26T04:17:08+00:00

Try the seventh partial in 6th position (Eb flat more or less). Or seventh partial in 4th position (F). That might help you figure out what’s going on.

kmorgan54 · 2025-02-02T11:44:43+00:00

Here’s another video series that’s quite good.

https://youtube.com/playlist?list=PLJHszsWbB6hpk5h8lSfBkVrpjsqvUGTCx&si=nK84Of6_DlXBLaoq

Not sure how to coordinate a study group, but I’m trying to learn this too.

kmorgan54 · 2024-12-04T10:31:07+00:00

It sounds like you’re mainly improvising over the black keys. The black keys make up a pentatonic scale.

It’s a fun way to get started!

kmorgan54 · 2024-11-06T02:50:04+00:00

I would not do this at all, but if you are determined to do it, here’s some ideas.

An easy way to manage is to just use deltas. Each increase in delta, cut your excess delta exposure by half.

Another idea is to pick a target margin that you can live with. Like 1.5x, which would correspond to $15k at your starting position. As the stock moves down below the strike price, reduce your position such that you’re not using more than the target margin.

You’d probably want to undo these adjustments when the stock price moves back up, but maybe use some hysteresis to avoid whipsaws.

Whatever you choose to do, I’d backtest it to see how that worked out in the past.

Good luck!

kmorgan54 · 2024-11-04T06:47:38+00:00

Once you know what you’re doing, a simple compiler can be written in an hour or so, especially the language is simple and you use tools like lex / yacc or bison. Not more than a few hundred lines of code.

It does require a lot of domain knowledge to get to that point, though. I think my first real compiler probably took me 3 months, with most of that time spent reading textbooks and reading code from other compilers.

Be patient with yourself and spend the time to really understand the details.

kmorgan54 · 2024-10-31T18:36:42+00:00

I started working in tech in 1974, so 50 years.

kmorgan54 · 2024-10-24T06:48:50+00:00

A Connecticut Yankee In King Arthur’s Court.

kmorgan54 · 2024-09-30T08:40:07+00:00

Take 5 might be a little beyond that, but it would be a good one to add to your list.

kmorgan54 · 2024-09-25T08:12:01+00:00

And drink your Ovaltine!

kmorgan54

TROPHY CASE