SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

Systematic vs. Discretionary Trading


Much of the discussion in finance is about "active" vs. "passive". Active management typically uses security selection and/or market timing to make portfolio management decisions. Passive management typically does not, instead, focusing on market risk premiums as the source of expected return. So which is better?

I personally think it's the wrong question to ask, instead, investors should determine if the approach is systematic (rules-based) or discretionary (human judgement based).

If you decide to keep it simple and buy either an S&P 500 or US Total Stock Market index fund to represent all or most of your portfolio, recognize that you've made an active management decision. This is because the US represents approximately half of the global equity market, and excluding International and Emerging Markets from your portfolio is an active bet on the US outperforming the rest of the world over your lifetime. So even buying a passively managed cap weighted index fund can be an active management decision. Perhaps only the "global market portfolio" is truly passive investing.

 

Instead, examine your personal beliefs on whether human based judgement can reliably add value over the long term vs. a well researched evidenced based investing approach that is implemented in a systematic manner. I'll disclose my bias with a quote from Daniel Kahneman:

 

image.png

 

Also, consider Ray Dalio's point of view on this topic:

 

image.png

 

If you're still not convinced, think about how you feel this month with the equity markets around the world dropping like a rock. Do you think that acting on emotions you feel during times like these will be based on well thought out long-term analysis? From my personal experience along with working with others, the answer to that question is obvious.

 

Jesse Blom is a licensed investment advisor and Vice President of Lorintine Capital, LP. He provides investment advice to clients all over the United States and around the world. Jesse has been in financial services since 2008 and is a CERTIFIED FINANCIAL PLANNER™. Working with a CFP® professional represents the highest standard of financial planning advice. Jesse has a Bachelor of Science in Finance from Oral Roberts University. Jesse is managing the LC Diversified portfolio and forum, the LC Diversified Fund, as well as contributes to the Steady Condors newsletter. 

What Is SteadyOptions?

Full Trading Plan

Complete Portfolio Approach

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • What’s Wrong With Your 401(k)? (If anything)

    There currently are over sixty million Americans that are active 401(k) participants, and well over 500,000 total active 401(k) plans offered by employers in the United States.  Despite these high numbers, usages could be higher, as the US Census Bureau estimates that only 41% of all employees with access to a 401(k) plan utilize it, with even less funding it fully.

    By cwelsh,

    • 0 comments
    • 83 views
  • Upcoming Decay of Options

    I am on the hunt for a short volatility position for three main reasons. First, the market’s wild swings have, for the time being at least, diminished. Second, option activity has dried up as my options barometer continues to be stuck in the 4 – 6 range as traders are not making big bets in either direction.

    By Jacob Mintz,

    • 0 comments
    • 140 views
  • The Scientific Process of Increasing Expected Returns

    For many US investors, the "base case" for equity investing is US large cap stocks, most commonly benchmarked as the S&P 500. You could absolutely do far worse than owning these 500 great US companies, and the weight of the evidence suggests that most actively managed mutual funds that benchmark themselves against the S&P 500 index have in fact done worse.

    By Jesse,

    • 0 comments
    • 282 views
  • Those Golden and Death Crosses

    The use of moving average (MA) for predicting future price behavior must be undertaken cautiously. MA is a lagging indicator, so the question must be: Can a lagging indicator provide guidance for the future? Yes. The use of two MA lines and how they interact is a reliable form of reversal indicator.

    By Michael C. Thomsett,

    • 0 comments
    • 259 views
  • Trading Reverse Iron Condors When IV Is Elevated

    Our members know that pre earnings straddles and calendars have been our bread and butter strategies in the recent years. We enter those trades when the prices are cheap compared to previous cycles. However, in the last few months of 2018, Implied Volatility exploded, making most of those trades too expensive.

    By Kim,

    • 0 comments
    • 293 views
  • How To Short Volatility The Right Way

    Shorting volatility in 2017 was easy money. In fact, it was easy money every year since 2010 when iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) has been created. Just go short VXX, buy puts or put debit spreads, and you would make money every year since 2010.

    By Kim,

    • 9 comments
    • 826 views
  • Leveraged Anchor Implementation

    This week Steady Options implemented the newest iteration of the Anchor trades – the Leveraged Anchor. This will now officially be tracked. We will also continue to track the Traditional Anchor as well. It is our belief that the Leveraged Anchor will perform better, on a risk adjusted basis than Anchor has, particularly on the upside of the trade.

    By cwelsh,

    • 0 comments
    • 766 views
  • 2018: A Year To Remember

    Making money in the stock market in 2017 was easy. Pick almost any stock or index. Buy calls. Sell put credit spreads. Almost any bullish or slightly bullish strategy would work. Everyone was a genius trader. Then came 2018. US stocks posted its worst year in a decade. Volatility exploded. 

    By Kim,

    • 0 comments
    • 522 views
  • SteadyOptions 2018 - Year In Review

    2018 marks our seventh year as a public service. It was an excellent and exciting year. We closed 124 winners out of 161 trades. Our model portfolio produced 129.5% compounded gain on the whole account based on 10% allocation per trade. The winning ratio was 77.0%. We had only one losing month in 2018. 

    By Kim,

    • 0 comments
    • 1,208 views
  • Systematic vs. Discretionary Trading

    Much of the discussion in finance is about "active" vs. "passive". Active management typically uses security selection and/or market timing to make portfolio management decisions. Passive management typically does not, instead, focusing on market risk premiums as the source of expected return. So which is better?

    By Jesse,

    • 0 comments
    • 607 views

  Report Article

We want to hear from you!


There are no comments to display.



Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account. It's easy and free!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

Options Trading Blogs