Blog Posts

Convergence trading strategies try to profit from the temporary mispricing of two related financial instruments that have diverged from their long-term equilibrium relationship.  Traders establish positions that will ideally benefit when the identified mispricing corrects itself and the assets converge back toward their expected equilibrium.  A deep understanding of the cause-effect mechanics and drivers of […]

We look at the differences between cointegration and correlations and its application in trading. Imagine a trader observing two assets that seem to move in unison. Do these assets offer a solid basis for a trading strategy (e.g., eventual convergence if they run apart)? Noticing this movement alone isn’t sufficient. It’s important to determine whether […]

Related securities and assets – most stocks, oil and natural gas – often move together in the market over long periods of time. This reflects a financial concept known as cointegration. Cointegration occurs when asset prices move together over the long term, even if they may diverge in the short term. While correlation is by […]

There are very few true monopolies in the stock market these days the classic sense, as antitrust laws and regulations aim to promote competition. Nonetheless, there are some companies that enjoy a dominant market position or quasi-monopolistic advantages in their respective industries.   Key Takeaways – Stocks That Are Monopolies Stocks that are monopolies (examples) […]

Seasonal stocks are those that tend to experience predictable patterns of price movements and trading activity at certain times of the year due to the cyclical or seasonal nature of their business operations. We look at the details of seasonality in the stock market and some examples.   Key Takeaways – Seasonal Stocks Here are […]

When a stock’s price falls to zero, it means the company has gone bankrupt or its shares have become essentially worthless. This situation typically arises from severe financial distress that leads the company to bankruptcy or a similar outcome where the company’s assets are insufficient to pay off its debts and obligations.   Key Takeaways […]

When you sell a stock, the buyer is typically another individual investor, an institutional investor, or a market maker. We look further into the topic below on the mechanics of the buying and selling process.   Key Takeaways – When You Sell a Stock Who Buys It?  Anonymity – You don’t necessarily know who specifically […]

In this article, we give a step-by-step breakdown of how to calculate portfolio beta. Understanding Beta Beta measures the volatility of a portfolio compared to the overall market. A beta of 1 means the portfolio moves in line with the market. A beta greater than 1 indicates more volatility than the market (higher risk, higher […]

Relative value trading involves identifying and exploiting pricing inefficiencies between related financial instruments or securities.  The key idea behind relative value trading is to identify and capitalize these pricing discrepancies between related instruments, while hedging out other market risks. Traders may use various quantitative models, statistical techniques, and fundamental analysis to identify relative value opportunities […]

Day trading with 0 DTE (Zero Days to Expiration) options is an advanced and risky options trading strategy.  We look at the strategies, risks, and general things to know when it comes to day trading 0 DTE options.   Key Takeaways – 0 DTE Options Not for Long-Term Holds  0 DTE (Zero Days to Expiration) […]