OMG I can't believe this fallacy still exists in trading!

[vanzandt]

The concept is the same whether it's a 50% drop or a 2% drop.

2% yes. 50% no.
I already told you that, I gave you TSLA as an example.

And before you even go there with "it's the same concept"... NO it's not. 2% is not 50%.
If it's the same concept... then it would apply to a 90% drop.
~case closed.

 

[vanzandt]

If you believe this, then you have a substantial reason to trade options as options don’t reflect this.

You can literally make billions because the pricing is so vastly different than your theory.

Those option writers don't have a clue. They need to read his article and adjust accordingly.

 

[newwurldmn]

Those option writers don't have a clue. They need to read his article and adjust accordingly.

Market makers are mispricing options by a factor of 10 or 20. Skew is way to cheap.

 

[vanzandt]

Market makers are mispricing options by a factor of 10 or 20. Skew is way to cheap.

This entire thread may turn out to be a goldmine for @destriero as we have uncovered a huge arb opportunity. I want in.

 

[wxytrader]

Make a list of things that makes a stock's price go up or down: good/bad earnings report,CEO cooking the books,a drug they been working on really does work,etc,etc,could be a pretty long list. Will MATH be written on that list?

Exactly..they just don't seem able to grasp the concept. You are better at giving examples than I am so perhaps I should let you carry the torch from here.

 

[vanzandt]

If NVDA drops 50% tomorrow... I'm going all in on the November $460 calls.

 

[Overnight]

The traders fallacy incorrectly assumes that because going from $10 to $5 is a 50% loss, and going from $5 to $10 is a 100% gain, means that there is less probability of price returning to $10. There is not.

You're suffering from the non-sequitur fallacy, which is you, as I pointed out on page 1, incorrectly concluding that the paragraph you used to start this thread was saying anything about the "difficulty" of a stock recovering 100% after a 50% drop.

It did not.

What the paragraph is pointing out is that some people seem to blindly sell their stocks after a large drop at an incorrect price point, thinking they have recovered their losses. It specifically states that some people whose stock drops 20% one week and then see it go up 20% the next week might think they will be able to sell at break even at that point.

The paragraph/article says NOTHING about probabilities. This whole thread is YOUR folly, in that you are trying to use the wrong end to justify your mean.

There is absolutely nothing wrong with what Investopedia wrote there. The problem is YOU.

 

[SunTrader]

You're getting close to understanding it. Would you say that a stock that was once a $100 and was now a $50 stock needs a lot more external force to return to $100 than it needed to drop to $50?

(Think of this as in a trading range not so much as a capitulation for simplicity)

Yes, because it is against the ttttttrend.

YOU are thinking in terms of $50 up, $50 down, what's the difference. Of course they are equal.

Where they are not equal is with context.

Anyway like I've said and Overnight and others this has nothing to do with your OP.

 

[wxytrader]

2% yes. 50% no.
I already told you that, I gave you TSLA as an example.

And before you even go there with "it's the same concept"... NO it's not. 2% is not 50%.
If it's the same concept... then it would apply to a 90% drop.
~case closed.

You are not even in the relm of the conversation.

 

[wxytrader]

Yes, because it is against the ttttttrend.

YOU are thinking in terms of $50 up, $50 down. Of course they are equal.

Where they are not equal is with context.

Sort of correct..as far as not relying on erroneous math to justify your opinion.