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This addresses this sense from the learners that there is some magic money drawer in the options markets that opens when you understand options theory. Spoiler: there isn't.
Options allow you to name your bet with more accuracy... https://twitter.com/KrisAbdelmessih/status/1250200319012696065
Options allow you to name your bet with more accuracy... https://twitter.com/KrisAbdelmessih/status/1250200319012696065
For example, 2 stocks may have the same price but different distributions. A biotech can be positively skewed. An insurance name negatively skewed.
Trading the stock is a blunt instrument if you want to bet on frequencies...
Trading the stock is a blunt instrument if you want to bet on frequencies...
For example the most probably value of a biotech may be zero. Shorting it is not the correct expression of that bet because a stock position p/l cares about frequency x magnitude.
Options allow you to isolate frequency...
Options allow you to isolate frequency...
You can trade a call spread or put spread to make an over/under bet.
Of course, the options market is smart. It reflects the different distributions.
In a sense, the options market "completes" the market.
Of course, the options market is smart. It reflects the different distributions.
In a sense, the options market "completes" the market.
Learning about options is not a holy grail but a finer paintbrush.
And like any artist with expanded tools you have the freedom to create a masterpiece that was previously locked.
And like any artist with expanded tools you have the freedom to create a masterpiece that was previously locked.
Or you can fail to control the freedom that it has given you and become more obsessed with the tool itself.
Or lose the ability to focus on the work that the tool was simply made to execute for you.
Learn what you can. There is no rule that says X will always work.
Or lose the ability to focus on the work that the tool was simply made to execute for you.
Learn what you can. There is no rule that says X will always work.
Markets are smart and adaptive. You already know that.
Options let you get into narrower and narrower expressions. New ways to win. New Ways to lose.
The timid don't need to be warned about options.
But one bit for the non-timid...
Options let you get into narrower and narrower expressions. New ways to win. New Ways to lose.
The timid don't need to be warned about options.
But one bit for the non-timid...
If you trade options AND don't believe in market timing you have a strange position to explain unless you have a very solid understanding of how you are using options.
Every option trade involves timing. You can be right. And lose lots of money. A fun way to lose.
Stay groovy
Every option trade involves timing. You can be right. And lose lots of money. A fun way to lose.
Stay groovy
