How to correctly Allocate?

[yalgaar 40]

I am a new member and have been reading all the material here several hours each day to understand everything in depth. I could not find or figure out the right way to allocate contracts while Opening a new position based Steady Options Trade.

Let us take an example of the following trade so I can explain better:

T hedged straddle at 9.10 debit              Posted Apr 09 2020
Buy to open 5  T  Apr.24  30.5 put 
Buy to open 5  T  Apr.24  30.5 call
Sell to open 2  T  Apr.17  30 put
Sell to open 2  T  Apr.17  31 call

 

The allocation on the above trade is based on a $10,000 account. All is well if I had a $10,000 account as well. Even if I had a $20,000 account no issues. I would just double the contract size. i.e 10 contracts for the Long and 4 contracts for the short side of the trade.

The challenge is when my fund are in between $10,000 and $20,000. Let us know my funds with exactly $14,000. How would I allocate in this case? 

If I allocate it based on $10K then I am not using the full potential of my funds....and it would feel like $4000 are just sitting and doing nothing.

If I allocated based on$20K I might be taking more risk than what I should be taking or I would want to take.

 

Also I would like to mention that the performance page seems to calculate returns based on allocation perfectly to $14000. But I believe I will not be able to achieve the same results. Please let me know your thoughts?

[Kim 7,943]

As mentioned in all trade alerts:

"The number of contracts is per 10k portfolio and represents the closest number of contracts for 10% allocation."

Since we cannot buy partial contracts, this is the best we can do in terms of allocation and reporting. Some trades will be slightly less than 10%, some slightly more.

To answer your question for 14k portfolio, you don't have to do the exact multiplier of the trade. You can use (for example) 7:3 ratio instead of 5:2.

The goal is not to replicate exactly our trades and our performance. The goal is to learn the strategies, so you can understand them and make slight modifications, based on your risk tolerance, portfolio size etc. And yes, you will always have some percentage of the funds in cash. Even our official model portfolio is never allocated 100%. This is what we mean when we say "We use a Total Portfolio approach for performance reporting, including cash reserve."

I believe the goal of all new members should be to learn the strategies. This should be the first and most important step

[yalgaar 40]

46 minutes ago, Kim said:

To answer your question for 14k portfolio, you don't have to do the exact multiplier of the trade. You can use (for example) 7:3 ratio instead of 5:2.

Thanks for your reply. What you mentioned makes total sense.