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The Core Strategy
Breaking down my basic approach to trading
Time is Money
You've probably heard the classic expression "time is money." This concept is at the core of my strategy. Most investors quickly realize that almost nothing is 100% certain. We refer to this uncertainty as risk and it is actually the reason opportunity exists at all. Still, it is important to embrace certainties where they do exist and the passage of time is one of them. In the world of investing, more time gives prices a greater chance to change by larger amounts. In other words – more time means more risk, and investors are willing to pay a pretty penny to reduce that risk. This is why time itself has monetary value. Our aim will be to harvest that value as profit.
Harvesting Time Value
In order to capture the value of time we must set a time limit. By starting a countdown, we create a scenario where time will eventually reach zero. This is important because once time reaches zero, so too does its value. This process is known as time-decay and is represented by the greek character θ hence the title "Food for Theta."
What if there was a product with a time-limit that we could sell early in the countdown for a HIGH time value, then buy it back CHEAPER once time runs low? We'd get to keep the difference in price as our profits! Let me introduce you to time-sensitive agreements between buyers and sellers to exchange for predetermined prices. By focusing our strategy primarily on the certain passage of time, we no longer need to rely as much on unpredictable stock prices to make money.
Interested in Learning More?
Follow My Progress Here at Food for Theta
If you're interested in learning more about my strategy, you can read about it in the Articles section where I break it down from bare basics to in-depth detail. You can also follow my trades in the Trade Journal, where I discuss thoughts and strategy using real examples from my portfolio.