The Hidden Math That’s Killing Your Profits

Don here…

Blake just shattered one of the most dangerous myths in trading.

You know the one… “I’m playing with the house money now.”

It sounds harmless. Maybe even smart. You’re up on a position, so the risk feels free.

Blake proved this thinking destroys more accounts than bad entries ever could.

The Market Doesn’t Care About Your Story

Blake opened with a truth that makes most traders uncomfortable. The market operates on price levels that matter to institutions. Support zones. Resistance breaks. Supply and demand imbalances.

Your personal entry price means absolutely nothing to these forces.

He demonstrated this with MARA Holdings, showing how traders manage positions based on where they got in rather than what the chart actually says.

The breakthrough question Blake asked: 

If you weren’t in this trade and saw the current setup, where would you go short?

That level tells you everything about risk management. Not your break-even. Not your original stop. The price where smart money would bet against you.

The 15-Cent Decision That Costs $565

Blake walked through a real SPY example that exposes the hidden danger in “high probability” trades.

Picture this: you sold a put for $5.80 with a 90% chance of keeping the premium. Now it’s expiration week and worth 15 cents.

Most traders see easy money. Blake sees a trap.

The math is brutal. You’re risking $565 in unrealized gains to collect that final 15 cents.

Blake’s question cuts deep: Would you sell that same put today for 15 cents with current market conditions?

If the answer is no, then staying in the trade violates basic risk principles. You’re making a bet you wouldn’t take with fresh eyes simply because you’re already in it.

When 90% Probability Becomes 10% Edge

Blake revealed the calculations that separate professionals from amateurs. On that same trade, you need to be right 88% of the time for the risk-reward to make sense. The market says you’ll be right 77% of the time.

That’s a negative 12% edge. You’re paying the house to gamble.

Most traders never run these numbers. They see 90% probability and assume it’s a lock. Blake showed why the final 10-15% of profit on any defined risk trade comes with completely shifted odds.

The Micron Earnings Solution

Blake didn’t just identify problems. He solved them live with a Micron example heading into earnings.

Instead of hoping for the best, he constructed a protective hedge using calls, puts, and calendars that actually generates premium while providing downside protection.

The structure pays for itself. The dividend helps cover costs. The short call funds the protective put. You participate in upside moves while limiting downside risk through a major event.

This isn’t about being bearish or bullish. It’s about managing risk mathematically instead of emotionally.

Blake’s core principle applies to every position you hold: stop managing trades based on where you got in. Start managing them based on where the market wants to go next.

The difference between these approaches determines whether you build wealth or give it back one “sure thing” at a time.

[→ Watch Blake’s complete position management session here]

To your success,

Don Kaufman

Chief Market Strategist, TheoTrade