Reader Peter T. writes in with a very good question: Then are several places on the site where you mention that you prefer to let the probabilities play out and not adjust condors. I calculated the expectation of the latest IWM trade based on the probabilities. I did some minor rounding to make it easier to read. There is a 65% probability of making $50 which comes to $32. There is a 35% probability of losing $150 which comes to $52. So the net…
Friday, January 16, 2009
In this mini-series, we’re examining the value of beta as a measurement of risk. In this post, we want to examine how the betas of some popular stocks, indexes, and ETFs changed during 2008 and especially during the fall crash. First, we should clarify exactly what we’re measuring. What is beta? Beta is metric that describes the systemic risk of an asset or portfolio. Because it is not possible to alleviate all risk by simple diversification, investors and traders use beta to…
Thursday, January 15, 2009
The old maxim is that when major market movements occur, all betas go to one. We decided to look at the beta for a few stocks during 2008 to determine whether and to what extent that maxim held true. The reason we wanted to investigate the beta exhibited during 2008 – and especially during the fall crash – is that investors and traders use beta as a measurement of how risky an asset is relative to the market, with the goal…
Wednesday, August 20, 2008
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In a note yesterday morning to members, we were looking for an oversold rally, and said rally still has yet to materialize in any big way. We still think the S&P will close the week closer to 1300 than to 1250, but that’s a conviction loosely held. The two biggest questions on our minds for the remainder of the week are: Will the financials stop dragging everybody down? $BIX, $BKX, XLF all had a good day today, but they need to hold…
Monday, June 9, 2008
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You won’t be able to avoid this story tonight: the 3G iPhone is here, and it’s everything everyone was hoping for. It’s faster, supports Exchange, has GPS, and is half the price of the first version. The other big announcement at today’s WWDC keynote was the rebranding of Apple’s .Mac service, now called Mobile Me. Billed as “Exchange for the rest of us,” the new service will enable you to sync your mail, calendar, contacts, photos, and files across multiple machines,…
Thursday, February 19, 2009
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