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The Skinny On Options Math

Options pricing models all revolve around probability theory. Though the math is done for you by your trading platform, we believe that understanding the number crunching behind the scenes will jump-start your trading. Join us as we show you how it's done.

Inferring from Brownian Bridges
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Jun 9, 2021

tastytrade explains finer points of the Black-Scholese model and how it relates to efficient markets and price movement.

Underlyings Hot and Cold
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Jun 2, 2021

Jacobs provides a fresh perspective on the role of volatility.

Momentumless Feedback Loops
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May 26, 2021

The market contains multiple price movement feedback loops — situations where a movement up or down in an underlying leads to more movement in that direction.

Monty Hall and Nontechnical Pigeons
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May 19, 2021

The Monty Hall problem is a well known exercise in probability with an unintuitive solution. Jacob explains how this can be applied to options trading. 

The Geometry of Correlation
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May 5, 2021

Discover how trading in a variety of underlyings can allow us to reduce risk without hurting profits.

Delta versus Probability of Profit
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Apr 28, 2021

Find out how accurate delta is as an estimate for probability of profit when trading options. 

Mean Reversion
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Apr 21, 2021

Find out what mean reversion is when trading stocks, options and futures and learn where we might find it in the market, and where we definitely don’t.

The Kelly Criterion
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Apr 14, 2021

tastytrade discusses the Kelly Criterion, which gives a mathematically optimal answer to this question in idealized circumstances, and how we can look to apply it in real world situations.

Quadratic Variation and Pairs Trades
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Apr 7, 2021

Find out how "jagged" charts are measured mathematically and how pairs trading can offset risk in rapidly moving underlyings. 

Consequences of No-Arbitrage
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Mar 31, 2021

tastytrade discusses the technical meaning of no-arbitrage, how it connects to the risk-neutral measure, and where it leaves market participants.

Time in Times of Low Volatility
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Mar 24, 2021

tastytraders know how to trade when volatility is high, but what can we do when it's low?

Charm Color and Schwarz's Theorem
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Mar 17, 2021
Second order Greeks can provide a deeper look into how option prices will evolve over time or respond changes in the market, tastytrade explains.
When Gamma Comes For Your Delta Beta
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Mar 10, 2021

During large market movements, previously delta-beta hedged positions can pick up directional risks. tastytrade explains what to do in these situations.

Why Normals Are Normal
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Mar 3, 2021

tastytrade explains why the normal distribution remains the most ubiquitous and safest assumption to make in an uncertain trading world.

One-Sided Skew In Two-Sided Markets
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Feb 24, 2021

tastytrade explains what skew actually says about the future price movements of an underlying and how the efficient market hypothesis can contradict our intuitions.

What Is a Skewed Smile?
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Feb 17, 2021

Volatility smile and skew describe how the market disagrees with pure Black-Scholes. tastytrade investigates how to interpret the volatility smile and skew.

Log-Normality in High Volatility
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Feb 10, 2021

Option math can't always account for the herd mentality of the market. tastytrade explains using GME as a recent example.

Clustering
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Feb 26, 2020
tastytrade discusses clustering, why it is such a powerful technique, and how clustering can be applied to pairs trading.
Probability of Profit
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Aug 6, 2015
This segment is a discussion on the probability of profit, applying it to trading and the Black-Scholes model and how to use simple math to calculate it.
What is the Efficient Market Hypothesis?
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Jul 30, 2015
Watch this segment for an in depth discussion of the efficient Market Hypothesis and what we can learn from it to help our trading!
How Standard is Standard Deviation?
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Jul 23, 2015
This segment delves into the topic of standard deviation in ways besides the usual options related concepts and way beyond a normal distribution pattern!
The Effects of Correlations.
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Jul 16, 2015
This segment discusses correlation and how to use correlation figures to reduce risk as opposed to offsetting with negative correlations which does not!
SABR Pricing Model
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Jul 2, 2015
Watch this segment for a discussion of the SABR pricing model and how it differs from Black-Scholes!
What is Meant by Vol of Vol?
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Jun 25, 2015
Watch this segment of "The Skinny On Options Math" to learn all about volatility of volatility!
Cycles-Statistical Models-Large Parameter Spaces
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Jun 18, 2015
Find out from Jacob the usefulness of cycles and what makes a good model!

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