Shop Talk: Twitter Bid, Oil Volatility, and Strategy Selection

Today's episode is extra special and a little bit different. I'm joined by Ryan Hysmith, our Chief Market Strategist, and we're using this opportunity to sift through a range of important current topics from the world of options trading.

The overarching message that comes out of this conversation is the constant possibility of improving your processes, and how trading offers us limitless learning potential.

Elon Musk's Twitter Bid

• Somewhat surprisingly, there was no big rally in the stock on the day of the buyout offer.
• The price is currently hovering between the takeover price and the initial price before the news emerged.
• This story is an example of how these gaps can grow on even the largest securities, and therefore we need to be careful with our position sizing. There was very little warning on this repricing.

The Attraction of Investing in IPOs

• We are aware of a few different schools of thought for investing in IPOs. These are namely long-term or short-term moves. 
• The recent evidence suggests that IPOs are not such a good investment, as many high flyers have dropped significantly since being offered.
• Interest in IPOs may well be a reflection of our need for feedback and instant gratification.

Strategy Selection

• As options traders, we need to be constantly looking for how we can improve. This is where the usefulness of testing, both backwards and forwards, comes in.
• While we look for the best strategy, we need to use our mistakes to gain maturity in our trading, while accepting the flaws that exist in all systems.  
• Another important part of this learning comes from being able to differentiate between the failures of a strategy and the results of market conditions. 

Crude Oil Volatility

• The last six or so months have seen some major events and shifts, impacted of course, by the situation in Ukraine. 
• We can see the exponential rise in volatility with regards to crude oil, and as things start spiking, it shows no signs of slowing down. 

The Conditions for Changing Habits

• It is a common theme in success stories that there is a big flop before the 'ship comes in.' 
• Staying in the same position can feel easy and comfortable, but oftentimes we need something to shake us up and get us moving.
• There may be some principles and laws that can transcend these shifts and these are worth figuring out for yourself because useful principles are relative to the trader.
• The trading game requires constant refinement and continual learning.

State of the Markets

• We have all seen the markets dip lately, although there is some potential recovery occurring. 
• With rising interest rates and rounding curves, there is some trouble below the surface. 
• It would appear that these signs all point towards sticking with positions longer, with a looser hold through this high volatility regime.