The Israeli SpeculatorThe Israeli SpeculatorThe blog for the rational and skeptic investor. Philosophies about investing and trading NOT about lame techinques that work for no one. This is not your typical investing blog Articles
Blame The Speculators!
2008-03-01 12:46:00 Unless you have been in a different planet, you know that the Dollar has declined in value against all major currencies in the world, even against the Israeli currency known as NIS (New Israeli Shekel). In January alone, the Dollar has declined about 7% in value against the Shekel. What followed after such a dramatic ... More About: Finance , Blame , Speculators
Why is the Option Price NOT its Expected Value
2008-02-17 08:46:00 I stumbled upon Peter Carr’s site and saw a very nice explanation on the arbitrage principles that govern option pricing. Usually explanations on option pricing are very cumbersome and not clear. Here is my take on it, but you can just go to his website and find it in the research papers under FAQ. Suppose you ... More About: Price
My current projects
2008-01-26 12:33:00 Hey everybody! I haven’t been updating this blog for about 2 months I think due to personal issues I had. I was also unable to answer any emails you had. But I am currently back in business! I am currently testing to see whether there is any merit in using the implied risk neutral distribution as a ... More About: Projects , Current
Back To Basics - Part I
2007-11-01 12:18:00 When participating in a forum about option trading, I have noticed that some of the participants did not know about a few basics relations in pricing options. The question I saw was a long the line of “The difference between Call 100 and Call 90 looks very big to me”. It had occured to me that ... More About: Back , Part , Black Scholes , Back To Basics , Basics
Back From Hiatus
2007-10-20 00:21:00 Hey Guys, I am sorry I didn’t get the chance to update the Blog. I was working with partners of mine on a project totally not connected to this blog. I did not realize it would take so much time from me. It was VERY long and I am proud of the outcome. It is an ... More About: Back , Topic , Hiatus
Are You a Rational Trader?
2007-09-19 10:19:00 The following example is taken from the work of Kahneman and Tversky: Consider the following scenario: Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations. Which is more likely? Linda is a bank ... More About: Rational
Why An Option is NOT a Good Investment
2007-09-18 10:32:00 Before you start yelling at me and tell me how can I say they are not good investment if I myself trade them, let me explain what I mean by that. It is true that I trade options, but only for short term trading. I usually get rid of my options in the same day. ... More About: Investment , Good , T A G
Happy Shana Tova - When Analysts Predict
2007-09-15 09:57:00 Happy new Jewish year! I have come across a news article in Hebrew on some predictions of analysts to the upcoming year. As always it serves for good laughs and fun. As you already know, I consider those prediction to equivalent of witchcraft. One Economist says that 2008 would be a very tough year because of ... More About: Finance , Happy , Predict , Hana , Anal
Is the delta a good measure of risk?
2007-08-28 14:40:00 For those who do not know, the delta is the sensitivity of an option to a movement of the underlying. This can be extended to a portfolio in which the delta reflects the sensitivity of the portfolio to the underlying. It is usually the case that the delta is given to us by the software ... More About: Risk , Black Scholes , Delta , Good , The D
Site Would Be Down For Maintenance
2007-08-21 13:51:00 Hello guys, Sorry for not updating the site in the last week. I am working on another program and of course you could download it for your enjoyment. It is some kind of a trading platform. I am also moving in the next hours the website to another database and I’ve been told the site would ... More About: Site , Maintenance , Tena
Panic and Euphoria
2007-08-07 22:47:00 The crazy roller coaster in the Israeli market and in the world markets made me very busy. The Israeli market was very volatile and exciting at the same time. A true trader thrives in these situations. The public and press are always behind A nice indicator I use, is what I call the crowed and press indicator. ... More About: Panic , Euph , Euphoria
Review of Taleb?s New Book : Black Swan
2007-07-29 10:55:00 I had finished reading Nassim Taleb’s new titled The Black Swan : The Impact of the Highly Improbable. It was a very nice read. Although I’d say if you are familiar with Taleb’s work this book may be a bit repetitive. I’d try to give here the main points of the book and how it is ... More About: Books , Review , Book
Lessons To Be Learned From Poker
2007-07-15 10:24:00 Here are some things I have learned from playing Poke r that are very applicable for trading: Play tight and aggressive. If you don’t have a good hand, don’t buy in. If you have a good hand, play aggressive. Playing is best if you have an edge. Think about probabilities. There is no point in getting ... More About: Lessons , Esso , Learned
Pairs Trading - An Introduction
2007-07-13 17:45:00 Pairs trading is some of the techniques hedge funds use in order to make profit on the dynamics between two stocks. The basic idea behind is pretty simple. Let’s consider an example of two stocks that might be somewhat correlated. This could be two companies in the food industry or the computer industry that might ... More About: Trading , Introduction , Intro
Implied Volatility Calculator and Graph
2007-07-11 19:30:00 There are several programs out there that purport to give you an accurate picture of the implied volatilities. Sadly, some of them are not accurate at all. I had put up a nice(?) program I wrote in Matlab to compute the Implied Volatility of options on a set of strikes. The good thing about the ... More About: Calculator , Graph , Lied
Capturing Investors? Expectations
2007-07-03 13:36:00 Is it possible to “capture” the expectations of investors? How is it even possible if each investor has his own expectation of where the price should be? Some Background Determining expectations when investing is important in order to price financial instruments. Take for example pricing an option with a strike of 100. If I expect that the ... More About: Finance , Investors , Expectations , Turin
A Nice Option Strategy
2007-06-28 20:59:00 I’m a big fan of simple option strategies. Complex does not always mean better. Some people often neglect option strategies that hedge risk. This might be an investor that buys a stock and also buy a put to protect against a drop. The analogy in this case is buying insurance in which the price of ... More About: Strategy , Nice , Opti , Rate
Confusing Luck With Skills
2007-06-24 22:05:00 The above graph shows the immense growth of the Israeli Stock Market. From the beginning of 2006 until last week, the TA25 made a whopping 33% return. This immense growth is evident by what I call the “hedge fund commercials” indicator. Business is good for hedge funds in Israel and these days you simply ... More About: Finance , Skills , Kill , Luck
Black and Scholes Imperfections
2007-06-18 20:52:00 I am currently reading a very interesting book by Jean-Philippe Bouchaud called “Theory of financial risks”. It is very recommended if you are mathematically inclined. The book tries to build option pricing from a different angle than the classical replication argument. These include assumption of continuous trading, constant volatility throughout the life of the option ... More About: Black , Scholes , Black Scholes , Hole , Perfection
Are Returns Log-Normally Distributed?
2007-06-14 19:49:00 If you ever heard the term “Log Normal Returns” and you wondered what it means, this post is for you. I’d also throw in a graph just for you. Why assume anything to begin with? Good question. Before I tackle the question on why it is assumed (in most cases) that returns are log-normally distributed, we ... More About: Black Scholes , Bute , Turn , Tribute , Tribu
Simple Stop-Loss Strategy That Does NOT Work
2007-06-12 13:22:00 In dealing with option trading, one often tries to find clever ways to beat the system. One which admittedly looks very promising, is the following: Let’s say we are interested in writing a call option at a strike price of 100 for some stock. In order to hedge our risk, we decide to buy 1 ... More About: Strategy , Work , Stop , Loss , Simple
Developing a Trading System
2007-06-08 19:14:00 Hey guys, I am currently a little bit busy on developing a trading system and checking to see if it can be useful to my trading. It is pretty hard to do so because there is not much information out there because as you might suspect, people make money out of it so no ... More About: System , Trading , Topic , Ping , Develop
Why I Stress The Efficient Market Hypothesis
2007-06-06 15:58:00 In all the blogs about trading and investing, I rarely see a discussion about the Efficient Mark et Hypothesis. The reason I’m always bringing it up is only because knowing what an efficient market means can help you make better trading decisions. Here is an example from a forum I used to participate in, about an ... More About: Stress , Tres
A Guide For Beginners
2007-06-05 17:21:00 Hey guys, I wrote an investing and trading guide for beginners which would also prove useful I think to more advanced traders and investors. Check it out here. If you find it useful, let me know. I’ll keep adding to it things to make it more complete. On a different note, I’ll start adding market ... More About: Guide , Topic , Guid
The Volatility Smile
2007-06-03 19:27:00 This post discusses what is the volatility smile and why should you care as a trader about it. I’ll keep it as simple as possible in order not to get into technicalities which won’t add anything to the understanding of the subject anyway. Black and Schole’s World If we consider the Black and Scholes’ world, we ... More About: Smile , Black Scholes , The V
The Right Mindset For The Option Trader
2007-05-31 18:05:00 The hardest thing for an option trader (or investor) is to change is mindset from an emotional one to a more productive logical one. When I started option trading and although I come from a mathematical background, the hardest thing was to think for the long run, not the short run. I wanted to be ... More About: Mindset , Opti , The O
The Variance Ratio Method - a Powerful Trend Indicator
2007-05-30 08:18:00 In the last post, I discussed the use of the Parkinson number as an indicator. In this post I will discuss a simple trend indicator you can use. Please read my volatility estimation post before attempting to read this post so it would make sense. Background In one of my posts, I discussed the method of sampling ... More About: Varia , Indicator , Trend , The V , Method
How To Estimate Volatility - Importance For The Option Trader - Part I
2007-05-28 21:02:00 One of the most important tools for the option trader are the Parkinson number and the Variance Ratio Method. The Parkinson number, named after physicist Michael Parkinson, is an estimator of the volatility of returns presupposing that returns follow a geometric random walk (If that last bit doesn’t tell you anything, don’t worry). If you take ... More About: Part , Opti , Import , The O
The Most Bang For The Buck Technique With Options
2007-05-27 09:28:00 In option trading, there are several basic techniques a trader should be aware of. Suppose you are convinced, with either a Technical Analysis method or whatever method you have under your sleeve, that a certain stock is about to rise in value. What can you do? The Most Bang For The Buck technique will basically ... More About: Technique , Options , Ique
Five Option Trading Techniques You Can Use RIGHT NOW To Make Money
More articles from this author:2007-05-25 00:00:00 This post is a reminder of some of the most effective option trading techniques that had worked best for me. If you are not doing these, then I suggest you read this post. Please note that these techniques work if you only use them correctly. So make the effort to learn and practice before you ... More About: Money , Make Money , Trading , Make , Ique 1, 2, 3, 4 |
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