Beware of These Two Mental Traps

What can we learn from the possibility of alien life or the idea that we live in a massive simulation?  If someone wanted to make the Hawaiian language a larger part of our lexicon, the word “oumuamua” would be a good start. When astronomers spotted a smallish (by astronomical standards) object back in 2017, it … Continued

The Smartest Guys in the Trade

Traders don’t need the highest IQ in the room—they can succeed with discipline, quick calculations, confident decisions and a little online help  People are sensitive about IQ. It’s a metric that purportedly reveals intelligence, and everyone wants to be thought of as smart—or at least smarter than average. And in the 100 years or so … Continued

Counting on Volatility

Scientists can only guess when the next pandemic or earthquake will strike, but with the help of volatility traders can quantifiably predict stock prices  The year 2020 will be remembered as tumultuous. With COVID-19, civil unrest and a highly emotional and consequential election, it’s a wonder anyone had time to look at the market. But … Continued

Bulls, Bears & Agnostics

Which party will control the White House and Congress? The dirty little secret is the markets really couldn’t care less. You know Xi Jinping? General Secretary of the Communist Party of China? Dictator for life? Crusher of protests? Look at his picture. If you didn’t know anything about the guy, tell me he couldn’t be … Continued

Home Economics

Even when it comes to a house, active investors don’t have to be passive Sitting down? Good. At home? Even better. Because beneath you lies your biggest single investment. Or should I say so-called investment? That would be your house. That’s where most people place most of the money they’ve earned. For others—those with significant … Continued

When Models Fail

Models aren’t just for pricing options—they can (sometimes) predict the spread and mortality of a pandemic. Just keep expectations in check. Models, by definition, are not precise and, inevitably, the people who rely on them seem less than perfect. Here’s a fact: The people who attack the models predicting the number of infections and deaths … Continued

Your Thinking Must be Skewed

 It’s said with good authority that volatility “skew” was born Oct. 19, 1987, when the magnitude of the market drop on Black Monday indicated all those previously out-of-the-money (OTM) puts that were now in-the-money had been much too inexpensive. Before volatility skew entered the world, the theoretical value of options was determined by a single … Continued

Testing Vaccines and Trading Strategies

Yes, active investment strategy has a lot in common with testing vaccines As though real-life were imitating a medical drama, COVID-19 is providing a glimpse into vaccine development. Testing a vaccine is perhaps the most important step in the process of making it available to the public. First, researchers don’t want to make someone sick … Continued

Forget the Darknet

The markets can provide the excitement active investors want—without risk of prison time Ah, the so-called darknet. The Wild West of the internet. Where anonymity—or as close as anyone outside DARPA (Defense Advanced Research Projects Agency) is going to get—provides a warm blanket while users surf unhindered by the blue-nosed algorithms of Google, Facebook, Apple, … Continued

Day Trading in China

Even in a communist country, people like to make money The Chinese began gambling at least 4,000 years ago, and they’ve made it a tradition ever since. It’s the reason that Macau has some of the busiest casinos in the world. Some might find a penchant for games of chance incongruous with a planned economy … Continued