Nothing can impact an investor’s success more than discipline. Warren Buffett noted that “the stock market is a device for transferring money from the impatient to the patient.” In studying the returns of various asset classes, JP Morgan made the startling conclusion that the average investor is the worst performing class:
I’m a big fan of the work of Cliff Asness and AQR (Applied Quantitative Research). Cliff was interviewed by Barry Ritholtz on his podcast. About twelve minutes in Barry asked Cliff what it means to be a quantitative investor.
Most traders are familiar with calendar spreads as a directionless trade that benefits from accelerated time decay for the near-term expiry position vs. the longer-dated option and benefits from volatility expansion. A "long calendar" spread is created when we sell the front month and buy the back month, getting a debit.
I've had few emails from people being assigned on positions and receiving margin calls, and generally not knowing what happened. I advise everyone to completely research and become familiar with the exercise/assignment aspect of option trading.
A good trade is one where you followed your process regardless of whether you made money or not. A bad trade is one where you didn’t follow your process regardless of whether you lost money or not. Amateur traders make one big mistake at the beginning.
Investing in bonds is considered a conservative way to hedge your falling stock trades.. Analyst and long-time market commentator Mark Hulbert noted this week that despite this past month’s price action, bonds are still a stock market hedge against stock market losses.
With fewer trading days and a historical record that favors an uptick in stocks and a downtick in volatility, the end of the year never fails to present an intriguing set of trading opportunities. One phenomenon related to the above is something I have labeled the “holiday effect".
Is the Black-Scholes pricing model of options accurate? Or even close to accurate? A very interesting study conducted by Sibson Consulting was cited in an article on the topic (Tim Reason, “The Holes in Black-Scholes,” CFO Magazine, March 1, 2003).
Ever seen those ads about making 5% per month with Iron Condors? It’s certainly possible, but you would have to be a bit naïve to think making a 60% per year return is simple. Most professional money managers cannot achieve those returns, so why would a retail trader be able to achieve it?
Stock Options Exercise and Assignment are among the most basic aspects of options trading that every options trader should understand. In this post I painstakingly explain one of the most basic option basics to a reader who is having trouble understanding that concept.
I would like to share with you another aspect of trading- my fascination with the different levels of trading experience. Starting in one of the latest discussions in the comments section, I shared with one of you that experience in trading comes in stages. I call those the 4 Levels of Trading.