The paper [Rebalance your portfolio without selling](https://arxiv.org/pdf/2305.12274) describes some more ways to optimize rebalancing.
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By utilizing derivatives when rebalancing, I can turn a buy into a sell and vice versa. The notional values of long or short derivatives can simulate a reduction or an increase in that asset class. As an example, let's say I need to sell $4000 of large cap to rebalance. Instead of selling that stock, I can buy a put, which will have a negative notional value. Say SPYM is trading at 80. A .50 delta PUT 200 days out might cost $400. By buying that, I've created a notional value of:
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By utilizing derivatives when rebalancing, I can turn a buy into a sell and vice versa. The notional values of long or short derivatives can simulate a reduction or an increase in that asset class. As an example, let's say I need to sell $4000 of large cap to rebalance. Instead of selling that stock, I can buy a put, which will have a negative notional value. Say SPYM is trading at 80. A .50 delta PUT 200 days out might cost $400. By buying that, I've created a negative notional value that can be added to my large cap balance:
If I needed to sell $8000, I could by 2 of these. What if I wanted to spend less? I could create a synthetic short: sell a call, and sell a put, at strike price 80. For larger sums, I might use futures.
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As another example, let's say I need to buy $4000 of large cap to rebalance. Instead of buying that stock, I can sell a put, which will have a positive notional value. Similar to above:
Instead of spending money on a buy, I am actually receiving money by selling the put. Once you understand derivatives as building blocks, you can convert transactions to/from buy/sell easily.
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## Efficient use of capital
One of the most important things I've come to realize is that you have to make efficient use of your capital. Tom Sosnoff and Tastytrade have some good videos on this: