Think like a trader
Someone recently asked me if obsessing over FOMC announcements, Non-Farm Payrolls reports, geopolitics and other macro news is important for traders. My answer might surprise you: unless you’re actually a dedicated macro trader – which is highly unlikely if you’re reading my stuff – it almost certainly won’t help your trading. Let’s start with what
Think like a trader
A lot of my advice boils down to trading is hard, so go after the easiest stuff you can find first. Some call this defeatist. I call it realistic and practical. A big part of trading is not screwing up. So, at the start, learning skills, defining processes, and building confidence are important. A question
Think like a trader
Someone recently asked me about the difference between our approach and discretionary order flow trading and technical analysis. Order flow trading involves sitting in front of a screen and looking at orders and trades as they come in and trying to work out if more buying or selling is happening, where those trades are occurring,
Think like a trader
I notice that in conversations with traders, they often think about entries, exits, and discrete trades with some sort of life-cycle. But your P&L does not come from a trade. A trade doesn’t change your P&L much, except for the commission and spread costs that you incur. Your P&L comes from holding a risk position
Think like a traderTrading as a business
I work with many traders who aspire to turn their passion for the markets into a serious trading business. And I think this aspiration is entirely appropriate – it’s critical to approach the trading problem as seriously as you would any business venture. A question that always comes up is, “Where do I start?” In
OptionsQuant tradingRThink like a trader
In this article, we’ll use simulation and simple visualisations to build intuition around how different variables drive the price of an option. Building this intuition is important because it helps you react quickly and make decisions without relying on complex pricing models. Let’s get to it. The value of a call option at expiration A
OptionsQuant tradingThink like a trader
This post assumes basic knowledge of Options and Mathematical Expectation. Most of the features that you observe about options are simply due to the fact that they are expiring bets. And the features we observe in option pricing are observed in any other expiring bet. The complicated maths and terminology that surround options can make it
Quant trading
Read the previous parts of this 101 series on options: There are 2 good reasons to buy put options: Because you think they are cheap Because you want downside protection. You want to use the skewed payoff profile to protect a portfolio against large downside moves without capping your upside too much. The first requires
Options
In this article, we explore the payoff to holding long options positions. Read the previous parts of this 101 series on options: Payoff Profile of a Long Call So far, we’ve plotted the value of an option at expiration. This is useful (as we’ll see later), but it doesn’t represent our profit and loss from
Options
Read the previous parts of this 101 series on options: Options have value because the future is uncertain. One thing that is known and always unchanging, however, is the value of a given option contract at expiry. This is the most fundamental thing about an option. Value of a Call Option at Expiration A call
Options
In the previous article, we discussed what makes an option valuable. At its core, an option is about choice—the choice to buy or sell an asset at a specific price within a set timeframe. In this article, we’ll explore exactly what this means. An option gives the holder the right, but not the obligation, to
OptionsThink like a trader
Financial options contracts are really just options. That is, they give us a choice or an option to do something. We’ll go through a simple example of why options are valuable. Let’s say I offer you the option to use my truck. What might the value of this option be to you? Is it Intrinsically Valuable? Maybe you need
Think like a trader
Think like a trader
Think like a trader
Think like a trader
Think like a trader