Jacob discusses how retail traders shouldn't stress about sophisticated pricing models used by financial institutions. While institutions employ various models (Black-Scholes, stochastic volatility, jump diffusion), the resulting prices all fall within the visible bid-ask spread. For liquid assets, tight spreads reveal a consensus on fair pricing that retail traders can trust. Experienced traders should focus on liquidity rather than complex mathematical models, with Sosnoff's "star system" providing practical guidance on tradeable assets. Jacob notes that retail traders may be "outgunned" compared to institutions but have the advantage of selectivity—choosing when to enter markets rather than making them continuously.
Jacob presents the "best choice problem" (formerly called the secretary problem) - a mathematical framework for making optimal decisions with incomplete information. The model suggests rejecting the first 37% of options to maximize chances of selecting the best candidate. However, if seeking "good enough" rather than perfect outcomes, rejecting just the square root of total options is optimal. For traders, this translates to using historical data to evaluate current opportunities without knowing future outcomes. Rather than endlessly seeking perfect setups, elimination processes and contextual evaluation of trade performance can lead to better decision-making and capital deployment.
The session opens with mixed market performance, notably E-minis down 17 points and significant declines in NASDAQ. The segment starts out with chip stocks like Nvidia (NVDA) and AMD (AMD). Traders then discuss various strategies, including bullish neutral plays on Salesforce (CRM) and long-term positions on SoFi (SOFI) and Tesla (TSLA). They explore iron condors in Roblox (RBLX) and UnitedHealth Group (UNH), while also navigating market volatility. A bullish sentiment emerges for CAVA, and the conversation emphasizes strategic options trading based on current volatility metrics.
In this segment of Options Jive, the hosts explain how to estimate the expected daily move of an underlying asset using options premiums. They emphasize the importance of implied volatility (IV) and provide a simplified formula: expected move equals price times IV times the square root of days to expiration over 365 (IV%/19). They highlight that while this method can lead to overestimations, it serves as a quick calculation tool for traders. Specific strategies for finding previous expected moves during earnings announcements are also discussed, along with the need for adjustments based on market conditions.
Will the stock market rally blow up if the Fed still looks reluctant to cut interest rates? All eyes turn to FOMC meeting minutes for a clue. tastylive's Head of Global Macro Ilya Spivak breaks down how stocks fell before minutes from the Federal Reserve's July policy meeting and explains why markets are so sensitive to Fed policy speculation.
OpenAI CEO Sam Altman compared the AI sector to the dot-com bubble, triggering a tech-led market selloff. Is this a buying opportunity or the start of a larger downturn? The Overtime panel analyzes what this means for tech investors and whether we're truly in an AI bubble.
Intel (INTC) received a $2 billion investment from SoftBank, signaling its potential resurgence amid ongoing tariff discussions. Viking Therapeutics (VKTX) faced setbacks in a weight loss trial, raising questions about its market viability. Target (TGT) is set to report earnings after struggling with flat sales and missed estimates for ten consecutive quarters. The ongoing volatility in the markets reflects broader trends,
On today’s From Theory to Practice, Dr. Jim works through the positions in his portfolio, highlighting the fact that the big down day is helping his Long Put Vertical Spread in QQQ and his Poor Man’s Covered Put in MSFT. His Short Put in HIMS is getting hurt, however, so he works through an adjustment to that strategy, by adding a Short Call that is outside of the Expected Move to the upside. This does now bring upside risk into the position, but it allows him to collect more credit and improve his break-even point on the downside.
A slight market pullback saw E-mini futures down 28 points and NASDAQ down over 1%, with high-flying tech names like Meta, NVIDIA, and Palantir experiencing significant declines. Traders discussed positioning ahead of Powell's upcoming Jackson Hole speech Friday. Thomas Westwater analyzed crude oil markets, focusing on the prompt spread (difference between current and next month contracts) which has decreased from $1 to $0.48 since early August. This suggests markets are moving toward a balanced supply-demand dynamic rather than the previous tight supply conditions. The group discussed hurricane season's potential impact on oil volatility, with all three hosts positioned neutral-to-long on crude. OVX (oil volatility index) currently sits at $33.35, below historical averages during hurricane season. Beyond oil, traders highlighted moves in agricultural commodities with grains trending lower while live cattle continues pushing higher amid ongoing concerns about the advancing screw worm affecting livestock.