Risk MITIGATION

Important Strategic Considerations

Lapse of Judgement

It happens. You misjudge an arbitrage opportunity you're stuck holding the correctly priced asset, or worse, an asset incorrectly in the wrong direction. It can happen. It will happen. You learn from your mistakes and adjust your models going forward. That's why you always diversify plays.  

HOW TO MITIGATE

  • Research.

  • Don't not do your research.

  • Continuously monitor your play for changes.

Lack of Diversification

Self-inflicted losses are the worst losses. Expect to misjudge a situation a percentage of the time. If you bake that into your calculations, you should be playing 5-15 arbitrage opportunities and hopefully have 80%+ playing out as expected.

​​HOW TO MITIGATE

  • Diversify.

  • Don't not diversify.

  • Continuously monitor your portfolio for risk.