MM38 - Reducing Risk After a Huge Rally

A lot of you have asked me, my stocks have all gone up, how do I lock in some gains? I am concerned about giving back all my profit. But not many of you are asking, how do I reduce my risk? That is equally important. And this is the question I want to answer today.

Not financial advice, but let me walk you through something. When we have had such a huge, strong run so quickly, it is important to go through your portfolio and say, where can I reduce some of my risk, and how can I do it?

Let me use a real example. During the tariff tantrums, a lot of people entered Nvidia. They sold the January 2028 $90 put and took the premium to buy the January 2028 $80 call. Maybe they had a $20 debit. Standard synthetic long.

Here is what is important. That $90 put, whether you are cash secured, whether you are on margin, no matter what the structure of your trade is, that is still a naked short put sitting in your portfolio. If you did not do these as modified synthetic longs and they are just straight sell put, buy call, that is a naked short put. It is easy to forget that it is there because it is so far out of the money. But the risk is still hanging out there.