Capital Allocation and Implied Volatility

3 Comments

December 27, 2015

Capital Allocation and Implied Volatility

How can you use implied volatility to help you allocate capital? In this video Don Kaufman of TheoTrade shares why you should look at the implied volatility of a stock before determining your capital allocation size. Different stocks and ETFs have different expected moves. Therefore you should not risk the same amount of capital on every stock or ETF.

 

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3 Comments

  • Kelly

    December 27, 2015

    Don,

    First, thanks for all the short in depth tutorials. Now understood on the comparison between stock for allocation purposes. Starting from scratch with no positions, what be a baseline iv to use? Would it be the broad market index overall, SP500 at the time, or the index iv your issue trades in, if different like RUT?

    Thanks

  • Steve

    December 27, 2015

    I have watched your videos tonight on IV, Open Interest and Decay. I have just realized I have
    been trading options with no real understanding on what to allocate to the trade as well as why some of my trades, spreads, lose everything in such a short period of time.
    What does this mean for me? I am looking forward to learning about options and how to analyse them and trade them with you and your new site.
    Thank you, I am beginning to realize there is a lot to learn that I simply do not understand, yet.
    Steve

  • Richard

    January 1, 2016

    Don,

    Thanks for the insights on capital allocation and other videos. This will improve the investments performance when applied.

    Rich