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The Skinny on Options: Abstract Applications hero image

Mondays | 8:40 - 9:00A CT

The Skinny on Options: Abstract Applications

The vast, limitless world of derivatives is quite complicated and very complex. So join Dr. Jim and dig beneath the surface – uncover some of the more intricate ideas that this space has to offer, and then apply these abstract concepts into your trading.

The Pareto Principle
Sep 20, 2021

The classic 80/20 rule, or the Pareto Principle, not only plays out in the world around us every day, but appears to govern stock price movements too.

Infinite Variance
Sep 13, 2021

Most financial models assume a finite variance, but given that stock prices are lognormally distributed with no upper bound, perhaps infinite variance is better...

Why Some Rolls are Debits
Aug 30, 2021

Have to pay a debit to roll your defined-risk position? tastytrade explains why that is.

The Volatility Tax
Aug 16, 2021

High volatility is usually viewed as opportunistic for us at tastytrade, but is there ever a situation where more volatility could actually tax our positions? Yes, there is.

Stable Paretian Distributions
Aug 9, 2021

Back in 1963, Eugene Fama suggested a Stable Paretian Model be used for the financial markets, and in 2021 at tastytrade, we think he might be right.

Gambling on Gamma
Aug 2, 2021
Strategies that fall in the 0-7 DTE range are taking a huge gamble with gamma, regardless of whether you’re playing positive gamma or protecting negative gamma.
Unbalanced Ratio Spreads
Jul 26, 2021

Unbalanced Ratio Spreads can allow us to add more downside protection, or amplify our upside return potential.

When Every Option is an ATM Option
Jul 19, 2021

Driven by Vanna, with a spike in volatility at tastytrade, OTM strikes will see their deltas rise and ITM strikes will see their deltas fall.

Why the Markets Move Higher Over Time
Jul 12, 2021

The market is structured to drift higher over time as the forces of Geometric Brownian Motion, the Capital Asset Pricing Model, and Supply and Demand show us.

The Math Behind Our Mechanics
Jun 28, 2021

Even though our mechanics have largely been built through experience and empirics, there exists some high-level, theoretical mathematics behind every move that we make.

Theta is Risk
Jun 21, 2021

Theta is typically thought of as a return metric, but here at tastytrade, we recognize that it has important risk characteristics too.

Margin Creep
Jun 14, 2021

As stock prices have risen significantly over the years, margins have also risen. But thankfully, the efficiency has remained intact, as premiums have risen, too.

Continuous Probabilities Part 2
Jun 7, 2021

The only way to use probabilities in a continuous space is to shift your focus from points on the curve to areas under the curve. tastytrade explains.

Continuous Probabilities Part 1
May 17, 2021
Because the underlying mathematics of the market are assumed to be continuous, there are no points on the normal distribution, only areas under the curve.
Supply & Demand is Undefeated
May 10, 2021
Since Supply and Demand has this uncanny way of always being correct, we feel at tastytrade that starting with price being true is the most strategic choice a trader can make.
When the Greeks Change Teams
May 3, 2021

With undefined-risk short premium, our theta is always positive and our vega always negative, but with defined-risk short premium, that is not always the case

Containing Runaway Prices
Apr 26, 2021
As option premium sellers. the biggest risk will always be the big, outlier move. But the tastytrade trading philosophy inherently mitigates these Black Swan risks.
Building Expected Moves
Apr 19, 2021

Now that we have a Standard Normal Variable that can be standardized into a Z-Score, we can begin to build an Expected Move at tastytrade.

Black Scholes Z Scores
Apr 12, 2021

Believe it or not, but we use Z-Scores every single day at tastytrade to analyze strategies and choose our strikes.

Standard Normal Variables in the BSM
Apr 5, 2021

At tastytrade, the Standard Normal Variables that come from the Black-Scholes Model form the foundation for all that we do.

A Posteriori Skill
Mar 29, 2021

The classic philosophical debate of a priori versus a posteriori has a direct connection to the world of options and how we trade at tastytrade.

Mathematical Magic
Mar 22, 2021

Not only does a more active approach to trading make it easier to adjust your positions and respond to market conditions, but the geometric return sequence could effortlessly improve.

Unknown Factors to Volatility
Mar 15, 2021

The fact that the intercept coefficient is statistically significant indicates that there are indeed unknown factors to volatility that have yet to be discovered.

Why the Markets are Random
Mar 8, 2021

The market randomness that we all feel every day has mathematical underpinnings that range all the way from heteroskedasticity to random volatility shocks.

Price Impact Velocity
Mar 1, 2021

The propensity for markets to fall so quickly could be the speed with which market makers drop their bid prices in falling markets relative to raising their offer prices in rising markets.

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