Today was one of those days that reminded me why diversification matters.
My All Star Options portfolio finished in the green on a day when many high-beta names had a rough go of it. Not because I'm some market wizard, but because I had the right mix of positions working for me.
Sure, I took some hits. HUT, RL, and APLD all suffered notable pullbacks that stung a bit. But what saved me was the short exposure I've been carrying—long puts in SMPL, TGT, and QQQ that cushioned the blow and then some.
Here's the thing: I didn't put these bearish trades on because I'm suddenly pessimistic about the market. We're in a bull market, and money is being made on the long side every day. But we never know when that ride is going to end.
Having some uncorrelated, bearish positions is just smart portfolio management.
When the market was offering incredibly cheap insurance last week, it felt irresponsible not to buy some:
And on days like today, I'm reminded exactly why that decision matters.
This is one of the things that makes options trading so powerful. Due to the low buying power requirements of most options strategies, I can efficiently spread risks across a variety of approaches—different strategies, timeframes, directions, and volatility plays.
Think about it: with the same capital that might buy you a few hundred shares of one stock, you can construct a diversified options portfolio that gives you exposure to multiple thesis, hedge against various scenarios, and position for different market outcomes.
Today's action perfectly illustrated why this approach works. While my long positions in high-beta names were getting hammered, my insurance positions were doing exactly what insurance is supposed to do—paying out when I needed them most.
It's not about being bearish or bullish. It's about being prepared.
The market has a funny way of reminding us that even in the strongest bull markets, individual days can be brutal. Having a mix of positions that don't all move in the same direction isn't just smart—it's essential for long-term survival.
When volatility is cheap, buy it. When correlations are low, take advantage. When everyone is positioned the same way, consider going the other direction with a small piece of your portfolio.
Today was validation that this approach works.
Want to hear more about how I think about portfolio diversification and insurance strategies? Watch this replay of today's Options Jam Session where I break down exactly how these positions saved my day and why having the right mix matters more than being right about market direction.
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Sean McLaughlin | Chief Options Strategist, All Star Charts
