Is Fundamental Analysis Dead?
As we wrap up our discussion on options trading in this section, most of you will undoubtedly ask if fundamental analysis is still a top factor in determining which securities we trade? Quick refresher: fundamental analysis is the study of a company's earnings growth, P/E ratios, dividend yield, etc as a predictor of future stock growth. Personally, I consider fundamental analysis to be a "non-factor" when trading options because if we are trading a highly liquid security then nearly all information available in the market is efficiently priced into that security's current stock price already. We can gain no additional edge. Therefore, it is a complete waste of our time to do fundamental analysis before making a trade that typically only lasts about 30 to 60 days. Whether you agree or disagree with me, know that I was an analyst on Wall Street and that I have successfully traded for the past 8 years without doing any fundamental analysis.