Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Doin’ It Gangnam Style

By -

A Few Random Thoughts

Before I get to the nitty-gritty I want to discuss a few random thoughts.

It’s been twelve days of range-bound trading for the S&P 500 (SPY). The benchmark ETF has been stuck between $140 and $142.50, but the journey through limbo land could be over soon enough.

The march into a short-term overbought today could be the last gasp for the bulls. The bears have been salivating waiting for the opportunity to push this market and the pot odds say its a go. The move since November 16th has finally extended itself so the odds are heavily weighted towards the bearish side.

If you had employed a few out-of-the-money bear call spreads over the past few weeks you should be in very good shape right now. A high-probability spread would have created a large margin for error just in case the bulls manage one push higher, but any advance over the next few days should be short-lived.

The Dow (DIA) and Russell 2000 (IWM) are officially in a short-term very overbought state with 9 other of the highly-liquid ETFs I follow. The S&P (SPY) has also joined the ranks of overbought which leaves only the tech-heavy Nasdaq 100 (QQQ) in a short-term neutral state.


(more…)

Some Investors Will Never Understand and That’s Okay

By -

I recently went back and forth with a gentleman who claimed that there are no statistical advantages in investing.

I asked him if he had ever used credit spreads or was familiar with the term probability of success. I wondered if he was familiar with the Black-Scholes model or binomial models in general. Did he have a sound grasp of mean-reversion or standard deviation.

No, he just wanted me to read a chapter from a book. As if in that one chapter, the author was able to defy mathematical science, more specifically probabilities.

(more…)

Use Probabilities Now!

By -

Some people will try
to take a simple concept and sprinkle it with some mumbo jumbo to make it seem
complicated and then claim only they can explain it to you! Don't listen or
don't buy into any such load of bunk!

Take options. Yes, a
lot of people, maybe even your stockbroker, will tell you options are too
complicated and confusing. What they may really be telling you is options are
something they don't want to spend the time to understand, so they don't want
you to trade them either!

It was only ten
years ago, that a privileged few investors who could take advantage of things
like streaming quotes and real-time options chains. Options were shrouded in
mystery and deemed too complex for the average Joe – to be traded only by the
so-called "sophisticated" professional investors.

(more…)

“Moneyball” Takes Down Wall Street

By -

By now I am sure all of you are aware of statistics guru, Nate Silver.

The unabashed numbers geek, professional poker player, baseball statistician and creator of the FiveThirtyEight blog on The New York Times website correctly predicted the outcome of all 50 states. In 2008 he accurately predicted 49 out of 50 states.

There is no doubt that Silver has ushered in a new level of credibility for statistical analysis.

Political journalist Dan Lyons said it best, “his accuracy on this year’s election represents what I call a victory of logic over punditry. Nate Silver was right and the pundits were wrong. And Silver won because of, well, mathematical science. Silver’s methodology is based solely on statistical data. He takes deep data sets and applies logical analytical methods to them.”

(more…)

How to Choose Your Own Probability of Success

By -

Quick Options Primer

I am often asked about how I come up with the probability of success percentage that I refer to in many of my reports and here on the blog.

For those of you new to the blog, I currently trade two options strategies (I hope to add a few more in the coming months). One of my strategies is a directional strategy using short-term overbought/oversold measures based on my high-probability, mean-reversion indicator. I play the strategy by using straight calls and puts.

The other strategy, and indeed my favorite, is the Theta Driver strategy where I sell out-of-the-money vertical spreads with a high probability of success.

(more…)