The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be talking about the number one diversification mistake you’re making right now, and that mistake is not acknowledging correlations. The huge mistake that a lot of people make with classical diversification is that they mistake quantity for quality, and what I mean by this is that a lot of people, when they get into diversifying their trading and trading more products, they just naturally trade more symbols and they go for the game of quantity, so the idea that if I trade five products versus one product, that makes me diversified. I have five tickers versus one ticker, now I’m diversified. But that’s not the story. The end result is that you could be trading five symbols that are either in the same industry sector or area of the market or just happen to be if they’re not in the same industry or sector, happen to be highly correlated to one another. The classic example of this is if you trade Home