Options Basics

Is Fundamental Analysis Dead?

Does fundamental analysis matter when trading high probability option strategies?
Is Fundamental Analysis Dead?
Kirk Du Plessis
Apr 19, 2021

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.

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Game of Numbers
Options trading is a game of numbers. To have confidence in a trading strategy you have to understand the long-term expectancy. Probabilities and position sizing are paramount.

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