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# Stock Trades for the Week Ending December 24, 2021

by | Dec 25, 2021 | Covered Calls, Stocks Purchased | 0 comments

#### December 21

##### Nvidia (NVDA) – Purchased Shares

This was a Tier 1 trade but was a small position given the large ATR.

#### Risk-Based Position Sizing

I have been asked to demonstrate how I determine the number of shares to purchase so I will provide the details below based on a portfolio size of \$250,000.

The first step in my calculation is determining the percentage of my portfolio to allocate to US equities. I use a number of momentum strategies (aka tactical asset allocation) to arrive at allocations for each asset class. Currently, my allocation to US equities is 38%, and thus for my example \$95,000 is allocated to US stocks.

The next step is a calculation of the risk value for my US equity holdings which is a personal choice and I am going to use a risk allocation of 5% in my example. I will assume that I will hold stocks in a maximum of six companies. \$95,000 x 5% = \$4,750. The dollar value of risk per stock position is \$4,750 / 6 = \$792. I divide \$792 by 2 x ATR(14) to calculate the number of shares to purchase. ATR(14) is the average true range of the stock price over the past 14 days. 2xATR(14) is a common value to use when setting a stop loss. The stop loss is generally Purchase Price – 2xATR(14) which in my example is \$43.65 – \$3.45 = \$40.20.

After the purchase is complete, I could set a hard stop loss of \$40.20 or a trailing stop loss of 8%. My choice is to select the latter.

If the concept of ATR is new to you, here is a helpful article on the StockCharts site.

#### Covered Calls Update

The table below provides trade details for my recently closed covered calls as well as a summary of covered call trades that I completed in 2021.

#### Asset Class Allocations

My tactical asset allocation model currently has allocations as provided in the table below.

My open trades can always be viewed here.

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