Tackle Today: Tale of Two Vols | Tackle Trading
≈ The equalizer ≈
We don’t live in the same country.
We don’t trade at the same hour of the day.
We don’t have the same age.
We differ in social stratification.
We might even trade in different exchanges.
We don’t trade the same assets.
Non-alcoholic beer to celebrate an IPO.
Or a dark Irish dry stout Guinness to celebrate a green day.
However, us or them.
Humans or machines.
Inside the markets, we are all the same.
Old or bold.
The penny stock guy.
The stock forum lady.
Or the soulless algorithms.
One equalizer.
Risk.
To the markets, risk is volatility.
Volatility, then.
Vol, for the intimate.
It’s all about Vol.
When we take the money out of our pockets.
And throw it into the market.
That’s Vol we are signing up for.
Risk-averse people buy low Vol.
Limited amplitude. Symmetrical distribution.
Experienced risk-takers buy high Vol.
Wide amplitude. Asymmetrical distribution.
Vol can be precisely measured. Present tense.
Vol can be historically evaluated. Past tense.
Vol can be forecasted. Future tense.
The future tense is far from trivial, though.
Vol in the future can behave as usual or helter-skelter like nothing else.
Risk-averse people buy trivial Vol. Homoscedastic but opaque. They buy a dog and end up petting a cheetah.
Experienced risk-takers buy helter-skelter Vol. Heteroscedastic and transparent.
They get what they paid for.
When panic sets in.
Trivial Vol ends up on the hanging tree.
Fiery Vol sails on the steel breeze.
The sun shines on everyone. Hedging too.
For the homoscedastic: Trivial Vol + Long anti-fragility.
For the heteroscedastic: High Vol + Pray for a stroke of good or bad luck.
Chart of the Day: Homoscedasticity & Heteroscedasticity
Video of the day: 9 Steps Every Trader Must Take
The development process is different for every new trader. But, in some form or fashion, you must go through these 9 steps to build your skillsets to become proficient at Trading.
Financial freedom is a journey
The Tackle Today series is brought to you by Tackle Trading.
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
Legal Disclaimer
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.
Originally published at https://tackletrading.com on March 5, 2020.
