Tag Archive | "trading"

Trading and the Null Hypothesis

Thursday, May 3, 2012


Over at TheStreet’s OptionsProfits, I write a daily column looking at trade ideas and volatility and all the other sorts of things you’d expect from an options trader. One kind of trade we like to look at is when you sell options, especially puts, after a major news event has caused an otherwise healthy stock to take a dip. We looked recently at the implied volatility in options on stocks like Wal-Mart (WMT) and OpenTable (OPEN) and, ultimately, decided there wasn’t an attractive…

The Problem with Volatility Skew, and Why You Should Care

Friday, February 24, 2012


The jargon of options trading sometimes turns people off, and maybe “volatility skew” is one of the biggest hurdles. So I’m going to explain the concept in a straightforward way, and then explain why volatility skew is something you should care very much about. Volatility skew usually refers to the difference between the implied volatilities of options at different strike prices in the same expiration cycle. For the majority of stocks and indexes, options with high strike prices have low…

On Eating What We Kill

Tuesday, July 12, 2011


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…

Everything You Know About Iron Condors Is Wrong

Tuesday, February 17, 2009


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…

Short Term Trading Strategies That Work (Review)

Friday, January 9, 2009


As technology advances, the variety of tools and strategies available to individual traders increases accordingly, and for newer traders the sheer number of techniques and strategies on offer can be daunting.  Short Term Trading Strategies That Work by Larry Connors is a nice introduction to some of the trading rules and strategies that have proven consistently helpful for navigating the markets. One of the best things about this text is that each strategy or technique is treated in quantitative…

An Antihumanist New Year’s Resolution

Friday, January 2, 2009

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Our New Year’s resolution is to exert as little control as possible over our trading. Why?  Because humans are terrible at decision-making, at changing, at acting in any way other than we have in the past.  On a collective level, we can’t seem to stop foisting unnecessary wars and economic crises on ourselves; as individuals, we only rarely pursue our real long term best interests. Human behavior is like a stock whose long term moving average never changes direction: sure,…

Edge, Execution, Allocation: Pieces of the Trading Puzzle

Tuesday, December 30, 2008


We spend a fair amount of time on this blog looking for trading systems that have some discernible and consistent edge over the market averages.  And edge is important: if you don’t know where your profits will come from, you certainly shouldn’t expect to have any.  But an empirically demonstrable edge is just one of the three components that comprise any good trading system.  The other two, execution and allocation, are also essential to the success of any trading…

Free Online Seminar – Using Iron Condors to Profit From Fear

Wednesday, October 29, 2008


Our head trader, Jared Woodard, will be presenting a free seminar tonight: Using Iron Condors to Profit From Fear Wednesday, October 29, 2008 9PM EST / 6PM PST Commodity Trading School http://www.commoditytradingschool.com/ “Using Iron Condors to Profit from Fear” will cover the structure and purpose of iron condor options spreads, and will explain how traders can use iron condors to generate income during periods of high volatility and uncertainty in the markets. Jared gave…

Idea Generation, Trading Success, and the Liberal Arts

Sunday, September 28, 2008


Dr. Brett is writing a series on the personality traits associated with risk-taking (as examined in some academic research), and in his second post, he reports on a trait that might not immediately jump to mind when you think about risk: 2) Entrepreneurial Idea-Generators – The research found that one of the two trait facets associated with financial risk assumption was “ideas”. The entrepreneurial trader is one who derives particular interest and satisfaction from idea generation (developing views on…

Option Strategies for Directionless Markets (Review)

Friday, July 25, 2008


Option Strategies for Directionless Markets: Trading with Butterflies, Iron Butterflies, and Condors Anthony J. Saliba, with Joseph C. Corona and Karen E. Johnson (Bloomberg Press: 2008) When traders are first exposed to spreading strategies like butterflies and iron condors, one of the first questions they always ask us is, “Can you recommend a book that goes into these strategies in more detail?  Where can I learn more?”  We’ve had to reply that there aren’t really any books that discuss iron…


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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