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Capital Deployment

In Management of Option selling portfolio, Capital deployment is key factor to manage Risk.

Capital deployment is an Art. It is a first step to give exposure to capital with Market Risk. It depends up on many factors to control Risk.

• 1. Speed of Deployment : Speed in simple formula Distance/Time. In Deployment when you increase speed it automatically increase Risk as well as Return.
• Market Trend :When trend is clear, it increase speed of deployment, while when market is in Sideways, it's automatically reduce speed of deployment.
• Intrinsic Volatility: When IV of options Higher it's give more opportunities to deployment, While in Low IV environment, it's automatically reduce it's speed.
• Speed of Roll Over:When your speed of Release of Blocked Margin increase, it's automatically increase Speed of deployment.

2. Size of Deployment : If ,Size of Bunch of Capital deployment is Small, it gives Higher control over Risk management. Position Size is the Most valuable factor in Risk management of portfolio. Small frequent trades not only control Risk but it gives higher chances to catch more opportunities.

3. Portfolio Size : Capital Size of Portfolio having close co relation with Deployment as well as Risk Conrol. Larger Size Portfolio has more systemic deployment and Risk Control over Smaller Size Portfolio.

4. Underlying Instruments : Deployment in Index having Higher Risk control over Individual Stocks. When you deploy in some Well known underlying on regular basis gives higher chances for positive Reward than deployment on lesser known underlying.

5. Liquidity : Liquidity is also one of the key factor plays important role in Deployment. Index having higher liquidity in Long term expiry compare to Stocks. When you deploy capital in Longer expiry, Liquidity is must to reduce Slippages as well liquidity Risk. Round number strike price have higher liquidity , So higher deployment.

6. Time of Expiry of Options : Long term Options have high probability for positive out come in compare to Shorter expiry because of GAMMA effect. So deployment in Longer expiry is more in compare to Short term expiries.