Stock Market Options Trading

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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INSIGHT

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.
ADVICE

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.
INSIGHT

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.
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