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The Option Trader’s Hedge Fund: A Business Framework for Trading Equity and Index Options by Mark Sebastian, Dennis A. Chen

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3. Risk Management

“Risk. Risk is our business. That’s what this starship is all about. That’s why we’re aboard her.”

—James T. Kirk, USS Enterprise, Star Trek, “Return to Tomorrow,” Ep. 51/4768.3

Any hedge fund, including TOMIC, is in the business of risk taking. It is not in the business of risk avoidance. According to Will Rogers, “You’ve got to go out on a limb sometimes because that’s where the fruit is.”

The business of TOMIC is to subscribe risk. TOMIC makes a living from taking other people’s risk in exchange for a premium. Taking risk is what pays the bills at TOMIC. In fact, everything in life carries a certain degree of risk. If people did not perceive risk, they would not buy insurance. If the stock market did not have risk, no one ...

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