Chapter 6

The Mechanics of Securitization and Monetization

In order to trade, you have to continually securitize money and monetize securities. In vibratrading, to monetize a security means to exit a position to lock in a profit, or in other words, to realize profits by converting them into cash. To securitize money, or equity, means to enter new long positions by converting cash into shares. In the process, we expose our account's equity to directional risk.

There are essentially three ways to monetize securities:

1. Monetize an arbitrary dollar amount.

2. Monetize IMV.

3. Monetize profit.

Example 1

Monetizing an arbitrary dollar amount, as in Figure 6.1, reduces exposure in the markets. Assume we bought 300 shares at $6, and that IMV is $1,800 and CP is $8.


Figure 6.1 Increase in CMV


If we needed to monetize $1,200, that is, to remove half, we would use the formula below.


By dividing amount by current price, $1,200/$8 = 150 shares to sell.

Example 2

We monetize IMV for a break-even exit. As in Figure 6.1, assume that we bought 300 lots at $6. Again, IMV is $1,800 and CP= $8.

To figure out how many shares to sell in this situation to remove all IMV, we use the equation shown ...

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