April 25, 2015

A Brief History of the Efficient Market Theory

For those of us who believe in a statistical approach to the market, Random Walk and more specifically, the Efficient Market Theory act as the foundation for our approach. For those of you who want to learn the beginnings of Efficient Market Theory check out the what "father of modern finance", American economist and Nobel laureate in Economics, Eugene Fama has to say. Fast forward to the around the 6:30 minute mark to hear what Gene has to say. An interesting listen for all the finance and investment geeks out there. Enjoy!   … [Read more...]

April Expiration Cycle is Behind Us

4-24-2015 9-00-31 PM

The Brazil ETF (EWZ) is the only underlying in an extreme state at the moment. We do have a few other highly-liquid ETFs entering into overbought/oversold territory, but nothing to trigger a trade. Again, EWZ is the only security currently in a short-term extreme. The implied volatility in EWZ is actually above 30%, so the ETF offers an interesting play at the moment and one that I might be making early next week in the Premium Seeker Portfolio. I recently introduced three new portfolios based on the key concepts I've based my trading on for years - probabilities, mean-reversion and proper risk-management. My approach hasn't changed at all. I just thought it was time to offer my subscribers more in the way of statistically-based … [Read more...]

Up, Down, Up, Down…What’s Next?

1-27-2015 9-56-02 PM

The market took a tumble today and my guess is there is more to come going forward. Although, as an options trader, the direction of the market doesn't really matter too much. As an options trader who focuses on options selling strategies, it's all about the volatility. As long as implied volatility for SPY stays above the historical average all is well in the land of high-probability options strategies. I've started off the year with several successful trades, but admittedly the trades have been few and far between. That's about to change. Stay tuned!!! If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each … [Read more...]

Welcome to the New Year…It’s Going to Be a Good One

As an options trader, I don't really concern myself too much with the directional tendencies of the market. Yes, I will have my occasional bias, but the bias is based on short-term overbought/oversold levels, better known as mean-reversion in the world of statistics. And once I have my so-called directional leaning I most often wrap a high-probability strategy around my bias using options. These simple steps are the foundation of almost everything I do as an options trader. And while these steps give me an edge, if used in the right manner, they still do not guarantee profits at each and every turn.But when you have the ability to take all emotion out of the equation and limit yourself to simple mechanics you are well on our way to becoming … [Read more...]

One Anomaly After Another

It’s been a while since my last post. In fact, it’s been exactly one month. During that time I received the following email from a long-standing subscriber: I'm sure that you don't need reinforcement for your strategies, but the following summary of SPY by Tom Sosnoff pretty much echoes your take on the current situation. Since October expiration, yesterday’s rally in the SPY marked 12 out of 16 days it’s gone up. Assuming that there’s a 50/50 chance that the SPY will go up or down on a given day, there’s about a 2.78% probability of having only 4 down days out of 16. And it’s unlikely even if you don’t believe that the probability is exactly 50/50. If that weren’t unlikely enough, the SPY is up over 8% since … [Read more...]