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SLE is the gift that keeps on giving.

The vol whale strikes again

What I’m saying is that all of the trades you make are actually 1:1. That you arbitrarily set an expected return that is greater than your expected loss is not a real measure of the risk/reward in a trade lol.

you're doing relative value which is not the same as just: and my comment was more of a response as to why one wouldn't just assume that buying deep itm calls is a better payoff vs. buying the stock outright. The convexity in options is not the same as leveraging a position.

Finding a subset of trades that can give you an asymmetrical payoff is an edge. Ex-ante you do not know what your return will be. What creates a positive expectation of a return is your edge. Medallion Fund and other HFTs are low edge (51-52%) but high volume and tight risk limits. The greater...

You need an edge AND risk management. An edge helps you find the trade. Risk management helps you survive. No one uses "MAE" in the hedge fund/investment bank world, fyi lol.

It's not a great idea because options are non-linear, which makes them an inefficient way to "lever up" on a stock (too many other factors).

I picked deflation. If the Fed has to print "unlimited money" for perpetuity, then it means the velocity of money and economic activity are anemic, and deflationary. ;)

You're building skill, which is what matters.

Just make sure that positive expectancy is based upon real skill (your edge) and not randomness. Otherwise, you will just bleed away your chips.

I'd wait a little. They had a big miss & lower, which tends to precede post-earnings announcement drift. Wait for 35x forward 2 year pe.

In real life, you do not know that your 1k trade is going to make 5k or vice versa. Also, if you do have a low win-rate, then your trading is worse than naïve. What that means is that you are worse at picking opportunities than randomly guessing. You have no skill.

Your ability to find and execute asymmetrical payoffs is the edge. :banghead:

short straddle + long otm call Capture that implied volatility and upside

I am not sure if you comprehend what you are saying. You cannot be profitable with a low win-rate system by definition. Even with risk management you are just bleeding money slowly. Your edge tells you when to size up on a trade. If you believe that your reward to risk is higher than 1:1 on a...

What are you trading (basic strategy)? If you're trading intra-day momentum, your exist signal should be deceleration in a trend (you define). I recommend reading Ernie Chan.

I was short NFLX. @OptionsOptionsOptions what is your approach to determine if 1) you should trade and 2) what direction to bet on?

Let me unpack this for you. You aren't familiar with momentum and autocorrelation? :confused: How much experience do you have on this topic? Your second statement negates the first. Your edge can be analytical, informational, or logistical. For example, floor traders used to have a logistical...

There is autocorrelation in market prices, which drives the momentum risk factor. If you want to invest in the momentum factor, you can do that through an etf. If you plan to trade the momentum factor, you’d better have a robust understanding of momentum, how momentum investors rank and select...

Great share. Always important to understand the nature of data.