Option prices contain useful information about the underlying asset.

In a previous post, we highlighted an article that showed how useful accounting numbers are.

Retail options trading volume has increased significantly, attracting growing attention from both market practitioners and academics.

Accounting numbers are prevalent in financial reporting, business valuation, and investment management.

How Correlation and Volatility Affect Portfolio Risk

Designing a robust trading strategy is not a trivial task.

Volatility estimators are a useful tool in volatility trading and risk management.

The P&L attribution of an option portfolio is highly important, as it aids in portfolio and risk management.

The arbitrage principle is one of the cornerstones of modern finance, and it’s being used widely, from derivative pricing to hedging, trading, and risk management.

It is well known that equity indices tend to exhibit a negative correlation with their volatility.

Pairs trading is a classic “market-neutral” trading strategy.

How Options Trading Creates Reflexive Market Dynamics

In the trading literature, we often see discussions about entry rules, but much less about exits.

A financial option is a rather complex instrument.

Retail options trading has become an important force in today’s financial markets, particularly with the rapid growth of short-dated options trading.

Bitcoin was born as a niche investment vehicle, but over time it has become a mainstream asset.

In today’s era of supercomputers, artificial intelligence (AI), and machine learning (ML), many tasks that once required hours or even days can now be completed in a fraction of a second.

How ETF Investing Is Changing Market Dynamics

We have previously presented time series analysis for identifying autocorrelation properties of stock indices and econometric techniques such as ARIMA and GARCH for estimating volatilities.

Artificial intelligence has become a major focus in finance and trading.

Volatility (or variance) risk premium is a well-known phenomenon in financial markets.

Regime classification plays an important role in portfolio management.

Factor investing is a well-known investment approach used mostly by quant funds.

Options volume has increased dramatically in recent years, particularly in very short-dated options (0DTE and 1DTE).

Identifying Market Regimes with Machine Learning and Entropy

Trading strategies are often loosely divided into two categories: trend-following and mean-reverting.

Volatility timing is the practice of adjusting portfolio exposure in response to changes in market volatility.

As discussed several times, markets can be loosely divided into two regimes: trending, and mean-reverting.

Regime change has become a recurring theme across financial markets.

Pairs trading, or statistical arbitrage, is an effective market-neutral trading strategy.

The Black–Scholes–Merton (BSM) model is one of the most celebrated option pricing models and remains widely used by academics and practitioners alike.

From Option Pricing to Portfolio Risk Management

A company’s book value is basically the net worth of its assets as found on the balance sheet, and it’s usually about equal to the amount that all shareholders will receive if the company liquidates...

Trend and mean reversion have been studied extensively.

Portfolio hedging is a risk-management practice that uses a number of strategies to mitigate the risks of any given portfolio.

Market dynamics have changed since the COVID-19 pandemic, driven by several structural developments.

Pairs trading is a quantitative trading strategy that is often discussed in the academic as well as practitioners’ literature.

Dealer Gamma Exposure (GEX) is an interesting concept that has gained attention in recent years and is now used by both retail and institutional traders.

Computerized Trading: Benefits and Risks

In financial markets, the logarithms of asset prices are often modeled as a normal distribution.

Large language models (LLMs) are evolving rapidly, from early text-generation systems to the latest models capable of sophisticated reasoning and multi-step decision-making.

Interest rates are a determinant factor in the pricing mechanism of public markets.

Decomposing option P&L into individual Greek contributions is a useful practice.

Implied volatility is a measure of the expected fluctuations in a security’s price.

In today’s age of AI and machine learning, developing trading strategies from historical data is becoming increasingly accessible.

The Evolution of Retail Options Trading

The volatility risk premium (VRP) is the difference between implied volatility and subsequently realized volatility, reflecting the compensation investors pay for volatility insurance.

Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific objectives.

Sentiment analysis has become an important tool in financial markets, helping researchers and practitioners extract information from news articles, social media, and other textual sources.

A technical trading system is a set of rules that define how to enter, exit, and manage trades in the financial markets.