You’re Probably Leaving Money on the Table
📊 A simple idea that made me question how I manage profitable positions
I watched a video from SMB Capital today about something they call “velocity of capital”, and it got me thinking.
The idea is simple: if a credit spread already gives you, say, 70–80% of its max profit well before expiration, maybe it doesn’t make sense to sit there waiting for the last bit. You close it, redeploy the capital, and run another trade.
On paper, it sounds obvious. In practice, I’m not sure it’s that straightforward.
My default approach has always been to let a well-structured position play out. If the thesis is intact and the risk is defined, why interfere? Most of the time, the edge comes from patience, not from constantly adjusting.
But the video raises a fair question: are we sometimes holding positions not because it’s optimal, but because we’re anchored to the original trade?
At some point, the remaining upside becomes small relative to the time and capital still tied up. And that’s where this idea of capital efficiency starts to make more sense.
At the same time, closing early creates a new problem: you now need another good setup. And forcing trades just to “keep capital moving” is a fast way to degrade performance.
So I don’t see this as a rule like “always take profits at 70%.” It feels more like a lens. In some market conditions, it probably improves returns. In others, it just adds unnecessary activity.
For now, I’m treating it as something to experiment with, not something to blindly adopt.
But it’s a useful reminder: sometimes the question isn’t how much is left in the trade, but whether the capital is still being used efficiently.
— Mansur
Disclaimer
All content is for informational purposes only and does not constitute financial advice.Any trades or strategies should be tested in a simulated environment before use.Trading involves risk, and all decisions are the sole responsibility of the reader.