Archive | Options Myths

Why Taleb is Wrong About Markets and Uncertainty

Monday, November 26, 2012

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Once you cut through the layers of purple prose and elective neologism, Nassim Nicholas Taleb's central thesis is not hard to understand: people often know less than they think that they do, and...

On Eating What We Kill

Tuesday, July 12, 2011

6 Comments

The video embedded below is making the rounds these days, to nearly universal reactions of vicarious embarrassment among people with souls. This is one of those cultural signifiers that splits its audience neatly in two: if you don’t find anything objectionable or cringe-inducing about this, chances are an explanation why everyone else does may not be of any help. Still, I tried to address exactly this subject last year in an editorial for Expiring Monthly. The column in question is…

Expiring Monthly Guest Contributors

Monday, May 30, 2011

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Expiring Monthly has published some great articles in recent months, many from guest contributors. In this post, I’d like to highlight some of those recent guest contributions. The May issue was published last week and is available now for subscribers – cf. my colleague Bill’s May recap. Chris McKhann (optionMONSTER) wrote a column in the January 2011 issue, “The Vega Calendar Trap,” on how the vega of a given calendar or diagonal spread can be deceiving, and…

Fear, Love, and Option Spreads

Friday, April 24, 2009

3 Comments

Traders with a background in stocks, futures, or forex are sometimes thrown off balance when they begin learning about options: one of the biggest hurdles is learning the various types of spreads, the risk characteristics of those spreads (i.e., the greeks), and how to think in terms of time, volatility, and price, instead of thinking in terms of price only.  One frequent misconception is that different spread types are strategies in and of themselves.  A reader sent in a comment…

Everything You Know About Iron Condors Is Wrong

Tuesday, February 17, 2009

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The conventional wisdom about iron condors and other market-neutral option positions goes like this: “These strategies are profitable when markets are not trending in one direction.  They are unprofitable during strongly trending markets.”  Even Investopedia opts for this one-dimensional explanation: This strategy is mainly used when a trader has a neutral outlook on the movement of the underlying security from which the options are derived. There are two problems with the conventional wisdom.  The first is that…

Top Five Trading Myths

Thursday, January 29, 2009

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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…

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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