Alternative Objectives

"A plan must have branches. You must threaten several objectives simultaneously so that the enemy cannot commit his reserves to protect them all." — B.H. Liddell Hart

The Military Context

Liddell Hart stated that a strategic plan must never have only a single objective. If you plan to attack only one city, the enemy can concentrate all their reserves there, making your task extremely difficult. However, if you march along a path that threatens both City A and City B simultaneously, the enemy is forced to split their forces, or hold back their reserves in indecision. Whichever objective they leave vulnerable becomes your true target. This is the principle of Alternative Objectives—achieving flexibility by keeping the opponent guessing.

The Wall Street Translation

In investing, having a single objective means having a rigid, binary thesis. You buy a stock believing that a single specific event will happen. If that event does not happen, your thesis is dead, and your capital is destroyed. An indirect investor develops alternative objectives by structuring their portfolio and trades with built-in flexibility.

Implementing Alternative Objectives

• Option Strategies: Using options is the ultimate way to implement alternative objectives. For example, a straddle or strangle strategy involves buying both a call and a put option on a volatile stock ahead of an earnings print. You do not care if the stock goes up or down; your objective is simply high volatility. Whichever direction the market moves, you profit.
• Dynamic Portfolios: When investing in a sector wave, do not try to guess which single startup will win. If you want to invest in AI, do not put all your money in one software company. Buy the hardware providers (chips), the cloud infrastructure providers, and the software leaders. You are threatening multiple objectives. Whichever company dominates, your portfolio wins.
• Conditional Thesis: If you buy a company for its growth, but the growth slows down while they announce a massive stock buyback program, your objective can shift from "growth play" to "capital return play." Be flexible enough to accept the new reality rather than selling at a loss out of stubbornness.

Actionable Trading Rules

1. Never Bet the Farm on a Binary Event: Do not buy short-dated call options on a biotech stock right before an FDA decision. If the decision is negative, your options go to zero. Use spreads or stock to limit your downside.
2. Diversify Within a Theme: If you are bullish on a new technology, buy a basket of 3-5 leading stocks in that space. Do not let your entire thesis depend on the execution of a single management team.
3. Write Multiple Scenarios: Before entering any trade, write down three scenarios: the bullish case, the bearish case, and the neutral case. Define your actions for each scenario in advance.