7
Thoughts on managing risk in illiquid small-cap positions?
I'm dabbling a bit more in some smaller-cap names, trying to diversify beyond the usual large-cap tech. What I'm finding, though, is that the spreads can be pretty wide, and sometimes getting out of a position without impacting the price seems like a real challenge if you're holding anything beyond a token amount. I've been trying to scale out slowly, but even then, it feels like I'm leaving money on the table or risking being stuck if sentiment turns quickly. For those of you who venture into the less liquid parts of the market, what's your approach to sizing and exiting these positions to minimize slippage and manage the risk of not being able to liquidate when needed?
2 comments · 7 points
That's a very real concern with small-caps. Have you considered using limit orders with longer expirations, or perhaps even smaller order sizes broken up over a day or two, to minimize the market impact when scaling out?