Size Matters
Size matters.
A lot of times when we look around at the content out there, we see a lot of FURUs showing screenshots of their callouts and how their alerts reached 20% 30% 40%. They will incrementally call out these levels with the impression that they have an unlimited size to work with, and that in the end, they were profitable, because even though the trade went red quickly after hitting 30%, they actually locked in most of the gains at 20%. Or if the trade ended up going to 100%, it gives them the flexibility to say they took off most of the position at 100%.
If you find yourself following these types of FURUs, beware. Here's why:
Risk is a function of size.
From the surface, it may not seem that way, but if you dig deeper, you'll realize that size gives you the flexibility to control risk, i.e. to scale out and to lock in profits; therefore, it is a very crucial factor in long term profitability.
However, if your FURU is simply entering a trade with a vague size, i.e. they say "entering with large size" or "going in with small size", or if they don't say anything, if they are not entering a trade with a quantifiable size, then it's safe to say that their alerts are hypothetical. If you are following them, you are letting them off the hook and giving them the freedom to work with unlimited size - the cheat code for them to claim that they sold most at say, the 100% mark. Perhaps they don’t even have a position, they're just watching the price and calling out percent returns, with unlimited chances to call out "take profits."
At Options Brewers, we see that. We know how the dog and pony show works, because we have been on the receiving end of this same charade. Thus, we aim to be different. Our goal is to teach, so our trade alerts come with a concrete base size. With that, it helps traders understand how to enter a trade with a workable size that allows them to actually scale out and take profits in a consistent manner. This means that when we scale out, we cannot take off more size than we entered with. Specifically, our entry alerts come with a size, our adjustment alerts come with a size, and our exit alerts come with a size.
Why do other FURUs not do this? Simple - because they are afraid that if they show size, they will unload too early, or not leave enough runners. They want the freedom to call out "scale out and take profit" without the restriction of size. If a trade goes to 10% profit but quickly reverses to -30%, they win, because they called out "take profits" at 10%. If a trade goes to 10% and they have already said "take profits", but then it goes higher to 100%, they win at 100%, because they can still say "take profits" at 100%. AKA, it gives them the ability to let you think that their entire trade went from the entry, to highest point observed. That's unrealistic and unhelpful for you - a big part of trading is knowing how to scale in and scale out.
We are confident at how and where we scale out and take profit, so we work with an actual size, and that's because we know something other FURUs don’t: spreads. Spreads give you the ability to reduce the cost of a bias so that you can enter with multiple tranches for risk control.
Others don't do this, and because of that, you aren't learning anything from them. When they incrementally point out how a specific options contract reached X% gains, that is something your P/L % column already does. There is nothing new there. It simply does not help you learn.
What helps is giving yourself the ability to scale out because you were able to cheapen the cost of your bias with spreads so that you can enter with multiple tranches. And what helps is understanding how to make adjustments to lock in profits while keeping the trade in play. Knowing these is a huge leg up. Against the rest of retail, knowing how to do all this gives you a huge advantage. Remember that in this industry, you don't need to have an edge over the institutions. You just need to have an edge over the other 99% of retail. And that's what we want to show you. How to be better than 99.9% of retail.
So, our question to you, is which team would you rather be on? Whenever you're ready, join us here
