1/n

Just finished my morning ride and yoga and I’m going to use Mikes tweet to elaborate on not only his quote and topic but something I have found very dear to me. It’s something I do real time without even realizing it anymore. It’s second nature and it brings me happiness

THREAD ON IRONFLY

These days the most preferred strategy for option sellers due to improved margins is IRONFLY. It's essentially a short straddle with long strangle. Long strangle acting as 'WINGS', which help in capping the unlimited risk associated with a short straddle.(1/n)

You can also view the position as a combination of Cal & Put credit spreads, if that makes it more easy for you.

There are 3 important things to understand while trading this strategy:

1) Initial size of the Wings
2) Risk Management
3) Adjustments

(2/n)

Since we are selling an ATM straddle, the 1st question is how far our wings should be? Ideally i sell .50 delta straddle & buy .20 or .10 OTM strangle, depending on my view on volatility. So the distance of wings depends on the IV setup. Higher the IVs, greater the distance.(3/n)

If you don't understand greeks, then ideally with 30 days to expiry (dte), wings should be around 300pts either side. If your trading in weekly then it should be not more than 200pts. Higher the premiums, higher the distance as we have more cushion of theta. (4/n)

It is important to understand that we need to reduce the distance of wings with time so as to manage our RISK in gap openings or sudden volatile move. So for eg. if you started with 300pt wings with 30dte, the wings wouldn't give the same protection when there is 7dte. (5/n)

Survivorship Bias 101

History is written by the victors. But if we exclusively focus on these successes, we allow survivorship bias to distort our understanding of the world.

But what is "survivorship bias" and how does it work?

Here's Survivorship Bias 101!

👇👇👇

1/ First, a few definitions.

Survivorship bias is the logical error of concentrating on survivors (successes) and ignoring casualties (failures).

When we do so, we miss the true "base rates" of survival (the actual probability of success) and arrive at flawed conclusions.

2/ When we completely ignore failures, we lose our ability to correctly identify the differences between successes and failures.

Put simply, exclusively focusing on successes may actually inhibit our ability to identify (and replicate) the actions that led to such success.

3/ Cicero wrote on the topic over 2,000 years ago.

An atheist named Diagoras is shown portraits of people who prayed and were saved from death at sea as proof of God's existence.

Diagoras replies, "I see those who were saved, but where are those painted who were shipwrecked?"

4/ Cicero cuts right to the point - we cannot conclude that prayer led to being saved from the sea if we ignore those who prayed and then drowned.

Survivorship bias can lead to a deeply-flawed understanding of cause-and-effect relationships.

Let's look at some examples.

To the person who thinks that they might be autistic. - a thread. /1

I imagine you have gone your entire life wondering why you are different, why you can't seem to understand things the way that others can and why everything just seems so hard. I'm proud of you for getting this far. /2

Part of you might be thinking:
"But if I was autistic, surely it would've been noticed when I was a kid? So maybe I'm making this up."
So many autistic people aren't diagnosed until they are adults, if diagnosed at all. You would not be the first and you won't be the last. /3

"My family and friends don't think that I could be autistic."
People's understandings of autism tend to be based off of the media, which doesn't show every possible presentation of autism, or based off of someone they know, and all autistic people present differently. /4

People's perceptions of autism can also be based off stereotypes, for example, "autistic people can't make eye contact, so you can't be autistic." While this is true for some, it isn't for all, so you can begin to see how one presentation of autism can't possibly fit everyone. /5

THREAD: On the full-fledged process of responding to a Revise-And-Resubmit (R&R).

I have written pieces of the process, but I hadn't actually written a thread or a blog post showcasing how all my blog posts fit with one another. I teach this process when I give workshops.

So here's what I do (now), and let me share a lesson from my past lives:

DO NOT SIT ON R&Rs.

I know, they're painful and scary and sometimes we don't know if our paper will get rejected in the end.

But remember, an R&R means an OPPORTUNITY to get your paper published.

Sitting on R&Rs, leaving them for later, and not prioritizing them has gotten me fewer publications. I know this for a fact. I am not ashamed of admitting that I have sometimes felt that I will not be capable of responding to multiple (often conflicting) comments.

HOWEVER...

Sustained, frequent advice from professors who are senior to me (though I am senior myself now too) is always the same and on-point:

The goal is the R&R.

You're not getting a desk rejection.

You are getting your work read, reviewed carefully, thought about, responded to.

What do I do now (and have been doing for the past few years, with success)

When I get the R&R (the "decision letter"), I make sure to calm down, because I am always afraid I'm going to get nasty comments. These have been (luckily) very rarely present in my latest submissions.