| Frequency vs magnitude. You can be right 9 out of 10 trades and still lose money.
Exactly.. in my example above.. it took a couple years of profits at $.25, $.35, $.40 a pop to offset the $3.00 losses occurred in those two years.. 1988/89.. the mid 1990's.. 2003'ish.. were not as bad.. but similar.
About the time you think you've got it figured out.. the market will throw you a curve ball.
That being said.. the basic premise of forward selling the Risks Premium is a good idea.. just "be careful" and understand the RISKS which you are taking.. the first third is probably not a bad idea.. however the first third can turn into 2 thirds pretty darn quick either during a heat wave.. or a flood.. (like now.) |