Imran Lakha | Options Insight@options_insight
"Defined risk" sounds boring to some people.
Small premium, limited upside. Grow a set!
Completely backwards.
I spent about $500 on a call fly last week trying to catch a bounce. If it works, that's $2,000 to $3,000. If it doesn't, I've lost $500. I made peace with that spend before I put it on. That's the whole point of these structures.
In a market like this, where nobody knows if we're bouncing Monday (as we did) or dropping another 5%, that structure lets me take repeated shots without killing my account. Spend $500. If it works, bank it and set up the next one. If it doesn't, move on, wait for more conviction.
Compare that to the trader buying 100 shares on margin to "catch the bounce." Same thesis. One knows their worst case. The other is hoping the market doesn't gap against them overnight.
Defined risk is how I stay aggressive when the market is at its most uncertain. You can take multiple well calculated shots when you know exactly what you're risking.
If you can't define the max loss before you click the button, you're playing with fire. With real money that gets expensive fast.
