How To Tranche
By Ernie Varitimos
February 12, 2022
0:00 / 19:51
How To Tranche

All right, here we go. 3, 2, 1. How are you doing friends Ernie? And this is the zero days to expiration podcast, episode number 77.

That's right. There have been 76 prior episodes to this one. No wait a minute. There have been 75 episodes prior to this. There is still that missing episode number 70, that I have no idea where it went. It's not on my hard drive here. It's not in YouTube land. It just disappeared. It's not on the pod. I just don't know what happened to number 70.

We'll have to dig it up someday and then just slip it in. It'll be a new tranche, which is, which happens to be the topic for today. What is a tranche? How do I use a tranche in Xero, DTE or trading in general, what is a tranche? It sounds very French, which it is derived from a French word.

That means a part of something in this particular instance. Tranche is a part of a trade or a part of a position. So when you take positions in a trade, you can say, let's say that. Let's back up a little bit. Let's suppose that you have lots of money, big accounts. And you've decided that your position size is about maybe one or 2% of the size of your total capital trading that's available.

And maybe you have a hundred thousand dollars. So let's say it's 1%. That means that you have a thousand dollars to put up for any one single trip. All right now, that's not, I guess you could call that a tranche, but that a thousand dollars for the type of trades that we put on here at zero DTE would be way bigger than what we actually do, because our risk is super small.

However, we go after very large profit. It's an asymmetrical trade. So our position sizes really never cost a risk as much more than say, 50 or a hundred dollars. What that means is that if you had a hundred thousand dollar account, you could theoretically put on, if 1% is your max size, 10 of these positions, each one of those positions, one 10th of your total position size, we would call that a tranche.

It is a part of the bigger position, right? So that's. What a tranche is. It's a part of, so that's how we refer to it here. And 0DTE land, I'm sorry. Zero dash DTE.com. Make sure you include that dash because without the dash you have trash, seriously, 0-dte.com is where you go to sign up for a trial at 0-dte.com/try.

Try it out for four weeks, you also can participate in this fantastic strategies, methods, and process. It's really a system that we do here. It's an educational service where we teach you how to trade the last day of expiration on the S and P we trade the SPX as well as the E-mini futures. Not so much the spy.

Now getting back to tranches a trial. In our world is a part of a position. So why would you want to do that? Because we trade with asymmetric positions. In other words, we trade with very little risk with the opportunity to make huge potential profit. Typically our trades that we put on, like today had a risk to reward of about one to eight.

That's about average. Some of our trades can go as high as one to 10, one to 15, even one to 20, the minimum size trade that we would ever accept is one to five. If we can't get a one to five risk to reward trade, we simply don't take it. All right. So let's assume that then we have this one to eight risk to reward.