Blog Posts

Paper trading is used by both novice and experienced traders. It allows individuals to practice trading strategies and gain market experience without risking real money. For beginners, it enables them to understand the basics of trading without losing money. For experienced traders, it allows them to test new strategies in a simulated environment. This article […]

Ratio spreads are advanced options strategies that involve buying and selling different numbers of options contracts with the same expiration date but different strike prices.  These strategies can be used to profit from specific market movements while limiting risk. Note that this type of unbalanced structure typically requires greater collateral requirements than traditional call and […]

Traders can be categorized in various ways, primarily by their trading strategies and their level of professionalism.  Here’s a breakdown: By Strategy Day Traders Definition – Traders who buy and sell financial instruments within the same trading day. They try to capitalize on short-term market movements. They rarely hold overnight. Characteristics – High-frequency trading, use of technical […]

Selling in-the-money (ITM) options is a strategy that often confuses both novice and experienced traders. For those selling ITM options “naked,” it’s often pursued by traders as a way to avoid paying margin interest or borrowing fees by simply buying or shorting the underlying. It can also be combined with other options positions as part […]

Aega, Sega, and Rega are advanced risk measures that go beyond traditional Greeks like Vega, Vanna, and Volga.   Key Takeaways – Aega, Sega, and Rega Aega, Rega, and Sega provide more comprehensive risk analysis for options with volatility smiles. They measure sensitivity to ATM volatility, risk reversal, and butterfly/strangle premium respectively. These metrics offer […]

The Option-Adjusted Spread (OAS) is a concept in fixed-income securities analysis, particularly in evaluating bonds with embedded options, such as callable or putable bonds. It represents the spread that traders receive over a benchmark yield curve, adjusted for the value of embedded options.   Key Takeaways – Option-Adjusted Spread (OAS) Risk-Adjusted Comparison OAS allows traders […]

Municipal bonds (munis) are debt securities issued by states, municipalities, or counties to finance public projects. These can include infrastructure developments like roads, schools, and hospitals. Trading municipal bonds involves buying and selling these securities in various market environments – e.g., either underweighting them or overweighting them in a portfolio based on specific circumstances.   […]

These lazy portfolios offer a range of strategies for those seeking simplicity, diversification, and balanced risk and return. Each portfolio has its own unique approach to achieving these goals, catering to different preferences and risk tolerances. Portfolio allocations are often more toward the sphere of investing, but can also be used by traders seeking the […]

Volatility term structure trading involves strategies that take advantage of the differences in implied volatility across different maturities for options on the same underlying asset. The implied volatility term structure (IVTS) refers to the relationship between the implied volatilities of options with the same underlying asset but different expiration dates.   Key Takeaways – Volatility […]

Volatility targeting is a trading and portfolio construction strategy that tries to achieve a desired level of volatility by dynamically adjusting the allocation of assets. This approach helps in maintaining a consistent risk level, which can lead to more stable returns and better overall discipline and risk management. Many institutional traders set volatility targeting levels […]