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Understanding Drawdowns

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Although we do our best to manage trades and prevent losers, losses are inevitable. As traders, our goal is to reduce the frequency and magnitude of these losses.

Since losses impact your portfolio value which, in turn, impacts your potential buying power, it’s important to keep losses in check.

Some keys to reducing drawdowns are to keep positions small, create more occurrences to let the probabilities play out, and trade uncorrelated products.

Tune in as Tom and Tony expand on the concept of drawdowns!

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