SteadyOptions Trading Blog

In our last article on the Anchor Strategy, we discussed what the strategy is and what it is not, as well as attempting to set expectations for investors. In this piece we’ll examine the possibility of “boosting” performance through the use of additional options to gain leverage.

While investing in financial markets over the long-term is an excellent path to wealth, it’s not unusual to experience occasional losses as investment values go up and down. So if the markets go up over time, why is it that most investors lose money in the stock market?

Options traders continually seek the elusive “sure thing” reversal signal. Of course, there is no such thing. But there are ways to use combined signals to identify likely reversal points. Add in strong confirming signals, and you have a reliable system for entering and exiting options trades.

Most options traders realize that annualizing returns does not reflect what you can expect to earn consistently. It is, however, a way to make relevant comparisons between outcomes of different holding periods.The first big question is, What is the basis for calculating a net return?

When trading options, one of the hardest concepts for beginner traders to learn is volatility, and specifically HOW TO TRADE VOLATILITY. After receiving numerous emails from people regarding this topic, I wanted to take an in depth look at option volatility.

Most traders have heard of the efficient market hypothesis (EMH) and most believe they know what it means. In a nutshell, it is a belief that the market is “efficient” and that the current price of shares is a reflection of efficiency. Right? Wrong.

Harry Browne popularized the concept of the "Permanent Portfolio" decades ago by recommending an asset allocation of 25% stocks, 25% bonds, 25% gold, and 25% cash. In the 90's, the concept of "risk parity" also became popular with writings by Cliff Asness of AQR Capital.

What is the overall impact of High Frequency Trading (HFT)? Some traders believe that the use of algorithms in super-fast and powerful computers allows large hedge funds and other institutions to beat the market, implying that because these big traders can out-perform individuals, profits are unfairly gained. But is it true?

Lorintine Capital and Steady Options have been trading the Anchor strategy for a number of years. During this time Anchor has evolved as we have learned more, in no short part due to the Steady Option’s members continuing questioning of the strategy, insights they provide, and a large group of individuals seeking to improve the strategy’s efficiency. 

You may be asking yourself why am I reading this basic article about options trading? Well, if you’re anything like me, I didn’t learn options trading via the fundamentals.  Rather, I found a few strategies that made sense to me and started trading, without much regard to the underlying workings and details.

Options traders focus, often too much, on implied volatility to estimate the next change in option valuation. Is this always a wise policy? Options are derived from volatility in the underlying security (thus the term derivatives), a good question is: Why not focus on volatility trends in the underlying (historical volatility) to judge likely future valuation trends in options?

In our Bitcoin: The Greater Fool Theory article, we discussed how the most popular cryptocurrency in the world can be compared to a worrying trend. The ‘greater fool theory’ states that the price of an asset is determined not by its intrinsic value but by the sentiments and expectations of market participants.