Calculating Tradability

Before placing a trade, confirm liquidity, implied volatility rank and risk exposure. Then make sure it fits the portfolio. Before executing a trade, confirm a product’s tradability. Do it by checking liquidity, implied volatility rank and risk exposure, and by ensuring its size fits the portfolio. Strive for consistency through a more conscious and precise … Continued

Acquiring Short Delta

Delta can be either static or dynamic. Here’s how to get either one. Acquiring short delta means adding positions that benefit from a move to the downside. Keep this cheat sheet as a reference for strategies. Delta can be either static or dynamic. To generate static short delta, sell stock or sell a future. Regardless … Continued

Delta Force

Choose from the many ways to add positive delta to a portfolio A contrarian strategy suggests buying into weakness and selling into strength. From that standpoint, the market currently resides in the territory of buying into weakness. To take that approach, know the ways to get long on an underlying. That can also be called … Continued

Three Rules for Longevity as an Active Investor

If you’re in it for the long haul, you need to know the rules—that the news doesn’t matter much, the markets are random and active trading beats long-term investing. Just when you think you know it all, you find there’s a lot left to learn. In my case, the lessons began in earnest after I … Continued

Trade Management

Prepare for almost anything by outlining and organizing a trading response for every for every short option position Investors should formulate a contingency plan as soon as they place a trade.  In the example of trade management below, the flowchart lays out actions to take for several possible scenarios. Improving mechanics this way is a … Continued

Making the Leap to Futures

Understanding the differences and similarities between futures and equities Even investors with plenty of experience  trading equities and exchange-traded funds (ETFs) may find the leap to futures a bit daunting. Futures can be big, and they move fast enough to steamroll the unprepared.  But once an investor becomes familiar with the difference between stocks and … Continued

Do Dice Play God?

Professional traders dwell in a complex landscape of uncertainty, probability assessment, decision-making and risk. They also wield powerful digital trading capabilities unimaginable only a few decades ago. It’s no longer a ticker-tape world where insiders with seats on the exchanges enjoy advantages unavailable to the outside world. The digital revolution has democratized trading, opening the doors … Continued

An Economist Walks Into a Brothel

It takes a certain type of economist—someone who’s devoted years to analyzing data but also possesses a keen eye for the quirks that guide humanity—to take apart, scrutinize and explain risk. And that’s why Allison Schrager’s provocatively titled book, An Economist Walks Into a Brothel and Other Unexpected Places to Understand Risk, makes for a … Continued

TRADING SARDINES

Certain souls become passionate about trading. Market dynamics fill them with adrenalin, feed their competitive urges and sometimes pad their bank accounts. They’re glued to their screens, searching for an edge, trying to take home a profit and hoping to avoid a loss. The game is pure and simply fascinating. Like life itself, the markets … Continued

AlphaBrain

This book on the process-driven approach to decision-making is an essential addition to any active investor’s library.