I was recently talking to someone about data mining as an approach to finding edges to trade. I get the appeal. Feed enough data into a computer, run enough tests, and surely something profitable will emerge, right? Maybe. But almost certainly not. But the worst thing about this approach is that it risks your entire …
Having a reliable source of free data is extremely handy for the independent trader. It allows you to move fast and look into your ideas quickly. Yahoo Finance recently changed how you can access their historical stock data. No more simple downloads from the website and programmatic access now requires a different approach. For the …
What’s a Fallen Angel Bond? It’s a bond that’s been kicked out of investment-grade paradise. Once upon a time, it was rubbing shoulders with the blue-chip elite. But then something happened – maybe the company took on too much debt, or the industry hit a rough patch – and next minute, the bond gets downgraded …
It was my absolute pleasure to chat with Kris Abdelmessih about markets and life. Kris was an options market maker who started out in the trading pits of New York and later flipped the script to set up the commodity options business for hedge fund Parallax Advisory. Today, Kris writes the Moontower newsletter on Substack …
UVXY is an ETF that targets 1.5x the daily returns of a 30-day constant-maturity position in VX futures – the SPVIXSTR index. Before 2018, it targeted 2x returns – but Volmageddon ruined the fun. UVXY has to trade every day: Anyone can trade UVXY in the market, and it trades close to the index because …
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 …
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 …
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 …
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 …
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 …
