Thu, Jan 29, 2009 | Jared Woodard
These are the top five trading myths that we would kill right now if we could. Since human brains are wired to remember often-repeated associations as true even if they’re false, we’ll state the true propositions.
- Technical analysis does not apply to 2x, 3x, and related inverse ETFs that track the daily changes in some underlying.
- You can’t trade the spot VIX; not with VIX futures, not with VIX ETNs, and not with VIX options.
- Credit spreads are synthetically equivalent to debit spreads. Neither is superior to the other.
- LEAPS are only a good replacement for buy-and-hold stock positions if you a) trade them dollar-neutral vs your old stock position and b) actually buy and hold the LEAPS, since over the short term they actually increase your volatility exposure.
- Correlation does not entail causation.
Ok, that last one certainly isn’t specific to traders.