136 - Trading Vol Atop the Moontower w/ Kris Abdelmessih
Sep 12, 2024
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Kris Abdelmessih, a former trader and market maker, shares his extensive knowledge on options trading and the development of Moontower AI. He dives into navigating market volatility and emphasizes understanding delta and time decay. Kris discusses the human discretion needed in trading analytics and how visual design aids decision-making. He also highlights the challenges retail investors face and the importance of education in this complex landscape. Listeners gain insights into effective risk management and resources to enhance their trading skills.
Kris Abdelmessih emphasizes the importance of understanding volatility and the precision required in defining trading theses with options.
The transition from a personal blog to the Party at the Moontower newsletter showcases the blend of personal storytelling and educational content in trading.
Chris highlights the challenges faced by retail traders when competing against institutional players, stressing the need for disciplined strategies and continuous learning.
Deep dives
Chris Abdomesia's Trading Journey
Chris Abdomesia shares a diverse and extensive background in trading, which began after he graduated college in 2000. He started with SIG's training program and spent significant time on the American Stock Exchange, eventually becoming a market maker in equity options. Over the years, he transitioned through various roles in different financial markets, including commodities, where he built a business in crude oil options. Most recently, he co-founded Moon Tower AI, a software company focused on providing innovative option analytics for traders.
Evolution of Writing and Content Creation
Chris discusses the origins of his newsletter, Party at the Moon Tower, which began as a blog 15 years ago called Shox Land. After taking a break from writing due to lack of interest, he began curating content for friends via WhatsApp, which led to the creation of his newsletter following encouragement from his wife. The newsletter evolved to share thoughts on various topics, including personal life and trading insights, striking a balance between personal expression and educational content. The title, inspired by the film 'Days of Confused,' reflects a laid-back, conversational approach to his writing.
Understanding Options Trading and Volatility
Chris emphasizes the significance of understanding volatility in options trading, particularly the idea that options are priced for specificity. He highlights that traders must rigorously define their thesis when utilizing options, as these tools demand precision in decision-making. He further discusses how options can be viewed as a method to manage risk compared to trading underlying securities, allowing for customized payout structures. However, the allure of options trading can lead inexperienced traders to make poor decisions if they're unfamiliar with the complexities of pricing and timing.
The Dynamics of Market Making
The podcast delves into the intricacies of market-making, explaining how market makers use various strategies to manage risk and ensure liquidity in trading. Chris illustrates that when markets become volatile and spreads widen, it often indicates that underlying markets are also experiencing instability. This can lead to reduced liquidity and increased risk premiums, as market makers charge more to compensate for the heightened uncertainty. Furthermore, increased competition among market participants can help restore equilibrium, even in chaotic trading environments.
Navigating the Challenges of Retail Trading
Chris shares insights on the difficulties faced by retail traders, particularly in relation to options trading. He explains that retail traders might struggle to compete with institutional players due to differences in resources and information access. He suggests that while systematic strategies can yield returns, it requires a disciplined and rigorous approach to evaluate performance accurately. Ultimately, he underscores the importance of understanding the broader market context and embracing a mindset focused on continuous improvement and learning in trading.
The Trade Busters provides actionable ideas to take your option trading to the next level. Through our educational podcast and instructional spreadsheets, we aim to empower the everyday retail trader. Discover unique ways of thinking through sizing, risk and leverage in your option strategies.