tastytrade logo
uploaded image

Aug 19, 2016

The Obvious Way to Make Money? | Truth or Skepticism

By:Josh Fabian

It’s hard to avoid politics in an election season. One of the more famous statements made by Donald Trump came back in 2007. When asked in a deposition about his net worth, Trump responded, “... it’s very subjective, sometimes you’ll have someone who will pay five times more or substantially more than someone else would pay.” And maybe, just maybe, that is how valuations work.

In today’s Truth or Skepticism, the concept of valuation took center stage in the context of market extremes. Dylan suggested a valuation, whether it is a market or private company is based on money earned and future growth potential. In other words, Dylan is describing the typical fundamental approach to valuation. And, when price exceeds potential earnings, price reaches an extreme. Does Tom agree?


Turns out, not so much. Tom takes a more subjective approach to valuations when forming an opinion on price extremes. What does it matter how the basis of an opinion is formed when those opinions are only correct 50% of the time? And maybe, just maybe, that is how valuations really work.

We all have opinions on market direction. However, tastytraders know trading those opinions only work out about half the time. That is why we focus on probabilistic outcomes and selling premium around them. Opinions are unavoidable but opinions cannot become more important than statistical probabilities. Yes, we do trade our opinions but we are not opinion-based traders who also sell premium. We are premium sellers with opinions.

Since we are on the topic of opinions and positions, how is Tom currently positioned? He is currently short S&P, Nasdaq, bond and oil futures. He is also long volatility which is the same as being short the broader market. Why? Because he is of the opinion markets are at an extreme.

What has Tom believing markets are at an extreme? You would have to ask him. Or, maybe, just maybe, Tom will accept Dylan’s offer to help him write a book and we can all kick back and get inside Tom’s head. Hopefully, we can get back out.  

Josh Fabian has been trading futures and derivatives for more than 25 years.

For more on this topic see:

Truth or Skepticism with Dylan Ratigan: August 18, 2016


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com. 

tastytrade is a trademark/servicemark owned by tastytrade.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

© copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.