Crypto-Currencies As Part Of Your Portfolio

As all the activity around crypto-currencies builds it is key to remember they are just another part of an investment and trading portfolio. We live in a fast-paced and changing world but as the saying goes, "the more things change, the more they stay the same." Whether you are investing in widgets or crypto-currencies, you should always be diversified and know as much as you can about what you are buying.  These are the best ways to shield yourself from losing your cash.  You should also reserve a decent amount of cash on hand to be able to take advantage of opportunities when they arise.  Just like the recent dip in Bitcoin that sent the rest of the market crumbling was due to someone dumping their holdings for personal reasons.  These fluctuations in the market happen and no one knows when they will occur but having cash on hand gives you the opportunity to take advantage of the opportunity to build a strong position relatively cheaply.

Crypto-currencies are the biggest thing since the rise of the dot coms.  There are a few of them that have become the standard bearers but many others are vying for position as well.  What makes one more valuable than the other is based on supply, technology and notoriety. Bitcoin of course is the most well-known and has the fewest coins available.  That is why it is the most expensive.  The main drawback with Bitcoin is that the technology is not as nimble as the newer coins so you can probably consider it as you would a precious metal like gold.  It's clunky and not as functional as cash.  Some of the other coins have risen to meet that need like Bitcoin Cash, Litecoin, Ethereum, Ripple and others.

It remains to be seen who will reign supreme but it's a good time to pick up some of the top names just to get started.  Don't use up all your reserves I would recommend only 20% of your portfolio at the moment but if you use the dollar cost average method of buying small amounts when the price is high and large amounts when the price drops you should be able to build a decent size portfolio of some of these crypto-currencies.

The Golden Trade

On Tuesday I made the infamous “golden trade.” I had a single contract put spread on that went profitable and I legged into another contract to create the long-sought-after golden trade.  This means that I can’t lose on this trade.  I can make between $3 and $102 but I can’t lose money.  The options expire next week so I will look to either leave it to close to expiration or cash in sometime next week.

Largest Single Option Winner

Yes I know the title is misleading, you were probably expecting a $5,000 trade.  Hope you’re not disappointed but that’s not how I trade.  I’m in it for the long haul and I am trading for income, so I normally trade single contract options.  Occasionally I will go up to 5 contracts but that’s rare.

On Monday I finally made an $80 profit on a single option trade.  Most of my trades have been below $60 (I follow the Tasty Trade Network’s motto “trade small trade often”) but it was great to finally make a nice chunk of change on a single option trade.  It took about 3 weeks to materialize and I legged into it but it finally worked. 

I can pinpoint what I did differently in two simple words…manage winners.  Previously I would close the trade if it was a loss or a winner but I realized after studying some higher level traders (some on Tasty Trade, Option Alpha, and others in various groups I’m in) they manage their winners and losers to maximize their income.

The other take away from this win is to be patient and let the trade come to you.  Do not constantly check the charts and your account.  You will make fool-hearted decisions that way.  Make a plan and execute it.  You can have plan B and plan C, but when you get to plan D, E & F you have a problem and you are overthinking it. 

Looking forward to continuing this process and hope you all are having some success in this new year.