[DocFever]

Thanks Teddi and desidon. That is helpful.

Just to clarify, when I used the term “position” in my initial question, I was not referring to number of contracts. Instead, for example, I would look at being short 5 vertical put spreads on MSFT and being short 10 vertical put spreads on DE as having “2 positions.” i.e. the risk the portfolio is exposed to is dependent on the price movements of two different underlying stocks. I think it’s a bit tricky to think about the size of each of these positions because you could think of it as the amount of capital required if you were assigned one or the other position, which is probably the proper way of thinking about it. By making it a spread rather than just a short put, you reduce the capital the brokerage counts against you, but in reality you are on the hook for being assigned the larger capital amount.

What I’m really trying to understand then, is how you approach diversification in the account. In a buy and hold stock portfolio, it’s easy to manage because it’s just the percentage size of each position. However in an options portfolio, the companies are constantly turning over, daily and weekly as you close positions early, they reach maturity, etc. Being thoughtful about diversification then seems like it requires a bit more planning and deliberation.

I welcome any feedback or thoughts.

Many thanks,
DF

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