I'm still figuring out my risk management and one thing I struggle with is correlated positions. If I'm long $SPX and also long a few tech names like $AAPL or $MSFT, obviously there's a huge overlap in exposure. Do you just size down your individual tech longs significantly, or is there a smarter way to think about portfolio-level risk when you have these correlated bets?
You hit on the main point: if you're long SPX, you're already long AAPL/MSFT to some extent. Sizing down those individual tech names is the most straightforward approach to avoid over-concentration. Thinking about beta-adjusted exposure for the individual tech stocks against your SPX position can also help refine the sizing.
You hit on the main point: you have to size down the individual tech longs, or recognize that your effective SPX exposure is higher than just the index position itself. There's no magic bullet; it's about understanding the underlying beta and adjusting your total notional to stay within your risk tolerance for that sector.