Blog Posts

A common criticism of hedge funds is that they don’t beat the market (commonly taken as the S&P 500, which is the world’s most tracked equity benchmark). Some even use this as a way to question why hedge funds exist in the first place. Namely, if something doesn’t add value, then shouldn’t natural forces do […]

Michael Marcus (1947-2023) was the first trader interviewed in Jack Schwager’s famous Market Wizards series. He’s known for doing what most traders dream of doing – transforming modest capital into significant amounts of money, often yielding returns that would be remarkable by any standard (48% compounded returns over a 20-year period). Let’s look into the […]

Ed Seykota is a trader most known for his work with automated, systematic trading and the futures market.  Famous for his feature in Market Wizards where author Jack Schwager wrote that his “achievements must certainly rank him as one of the best traders of our time,” Seykota began trading in the 1970s, at a time when […]

Understanding randomness is important for traders and investors. It shapes risk management strategies, the effectiveness of trading algorithms, and decision-making processes.  The skill vs. luck question is especially relevant for new traders, as any initial success or failure may be attributed to one or the other without actually knowing what’s causing or leading to what. […]

The Put/Call Ratio is a popular and widely-used indicator in options trading and technical analysis. It helps traders understand market sentiment and potential trend reversals. It’s calculated by dividing the total number of put options traded by the total number of call options traded over a specific period. The ratio can be calculated for individual […]

Options expiration statistics help understand how options contracts behave as they approach their expiration dates. In turn, this can influence trading strategies and risk management. Understanding these patterns can be useful for traders using various types of options trading strategies.   Key Takeaways – Options Expiration Statistics 10% of option contracts are exercised early.  50–60% […]

Options strategies can provide income through various means, such as selling premium, hedging, or through market movements. These strategies try to efficiently balance risk and reward and offer consistent income while managing potential losses. Options strategies for income generally entail concepts such as the covered call and other “covered” concepts involving some combination of having a […]

The Wheeling strategy is a simple yet effective options trading technique.  Based on selling put options and covered calls, this cyclical strategy allows traders to generate income regardless of market trends.  Here, we’ll look at how the Wheeling strategy works, its risks and rewards, and how to use it.   Key Takeaways – Wheeling Strategy […]

Every decision that you make in the financial markets should be formulated as an expected value calculation. Every trade or every bet can be thought of as a probability. There is a probability and reward for being right and there’s a probability and penalty for being incorrect. In other words, how to calculate expected value […]

Max pain is a concept in options trading that relates to potential price movements as options approach expiration. It’s rooted in the idea that market makers, or option writers, have an incentive to minimize the payouts to options holders at expiration.  This idea suggests that, in the final hours or days before options expire, the […]