Diversification is spreading money across multiple assets as opposed to just 1 or 2 (i.e. “don’t put all your eggs in one basket”). So how do you pick those assets?

Correlation matrices are a good place to start. Pick symbols that have correlations closer to 0. So if you are long the S&P 500, perhaps pick GLD, SLV and TLT.

Also, choose option strategies that are across different months and using different option strategies. For example, perhaps diversify by using September expiration when initiating positions.

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Cherry Picks is written in collaboration with Michael Rechenthin, PhD, Head of Data Science at tastytrade; and James Blakeway, CEO of Quiet Foundation, a data science-driven subsidiary of tastytrade.