Kass: A New Market Playbook
Below are some parameters that you might consider.
If you normally have a mix of investing capital to trading capital of 3:1, perhaps move it back into balance by reducing your investment exposure from 75% to 50% and increasing your trading exposure from 25% to 50%.
By contrast, given my negative market view, I plan to move even more dramatically in the direction of trading over investing. And, as I have written, you will be seeing more and more tactical trades in the months ahead from me in my diary.
I would also be more diversified and less concentrated than typical in the uncertain market ahead.Keep industry concentration under 15% of your portfolio and any individual stock (long or short) under 4% or so. Basically, as I have emphasized, err on the side of conservatism. As a trader, you want to have much higher cash reserves in order to be in an opportunistic mode. In terms of trading style, I tend to be news- or catalyst-driven. In a volatile market, I also like to buy the dips and sell the rips. As well in a limited trending market, I have a tendency to buy group/sector laggards and to sell/short group/sector leaders. Pair trades should also be considered, as should selling option premium (calls and puts). It might be time to consider a change in our approach in order to profit from a transforming market.
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