

118: Applying First Principles to Options Trading
Jun 1, 2024
Trading content creator Erik Smolinski discusses applying First Principles to options trading, evolution in trading approaches, backtesting, psychology, intraday seasonality, automation in trading systems, and mastering emotions in options trading.
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First Principles in Options Trading
- Focus on identifying market inefficiencies, especially in newer markets like zero DTE options.
- Over-optimization on small details can distract from the core goal.
Effort in Trading
- Conduct thorough research and analysis, acknowledging the effort required for successful trading.
- Don't rely solely on readily available information; dig deeper to uncover valuable insights.
Variance Risk Premium
- Implied volatility tends to be higher than realized volatility, creating opportunities for option sellers.
- Many market participants overpay for protection, providing an edge for liquidity providers.