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Managing Winners: Part Three - Volatility and Risk

From Theory To Practice

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

Today, we conclude our little three-part series on Managing Winners, by addressing the volatility and risk associated with this trading philosophy. What we learn is that when looking at the delta changes of holding to expiration versus managing winners, managing winners at 50% does experience slightly higher volatility. However, when we consider the risk/return trade-off, this makes intuitive sense.

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