Those who can best manage uncertainty will be most successful
Jim Simons about uncertainty:
"Don't rely on luck alone. Develop a systematic approach that accounts for uncertainty and seeks to capitalize on opportunities."
This quote highlights the importance of understanding and managing uncertainty in order to be successful in any field, including finance. Simons is a renowned mathematician and hedge fund manager who founded Renaissance Technologies, one of the most successful hedge funds in history. He is known for his quantitative approach to investing, which relies on rigorous statistical analysis and modeling to identify and exploit market inefficiencies.
This quote is a reminder that uncertainty is a fundamental part of the financial markets. There is no way to perfectly predict the future, so investors must develop strategies that can handle uncertainty and still generate profits. This can be done by developing a systematic approach to investing that takes into account the different sources of uncertainty and seeks to capitalize on opportunities when they arise.
Jim Simons also said:
"The market is a complex system, and it is impossible to predict with certainty what will happen in the future."
"The best way to deal with uncertainty is to embrace it and develop strategies that can handle it."
"Uncertainty is a source of opportunity, as well as risk. Those who can best manage uncertainty will be the most successful."
Yesterday's published trade idea:
On September 14, 2023, I recommended a non-directional strangle trade on the QQQ index, which is currently up 22% in less than one day. I believe that when implied volatility is rising, it is often more profitable to bet on volatility than on the direction of the market.
Implied volatility (IV) is a measure of how much uncertainty there is about the future price of an asset. It is calculated using the prices of options on that asset. The higher the implied volatility, the more uncertainty there is about the future price, and the more expensive options will be.
FOMC September 20,2023:
The Federal Open Market Committee (FOMC) is the committee of the Federal Reserve System that sets monetary policy for the United States. The FOMC meets eight times per year to discuss and decide on interest rates and other monetary policy measures.
The FOMC meetings are often followed by a spike in implied volatility, as investors try to gauge the impact of the meeting on the future direction of the market. This is because the FOMC meetings can have a significant impact on asset prices, and investors are uncertain about what the outcome of the meeting will be.
For example, if the FOMC decides to raise interest rates, this could lead to a sell-off in stocks, as investors become more risk-averse. This would increase implied volatility, as investors would be more uncertain about the future price of stocks.
Conversely, if the FOMC decides to keep interest rates unchanged, this could lead to a rally in stocks, as investors become more optimistic about the economic outlook. This would decrease implied volatility, as investors would be more certain about the future price of stocks.
In general, implied volatility tends to be higher around FOMC meetings, as investors are more uncertain about the impact of the meeting on asset prices. However, the correlation between implied volatility and FOMC meetings is not always perfect, and there are other factors that can also affect implied volatility, such as economic data releases and political events.
Here are some other factors that can affect implied volatility:
Economic data releases: When economic data releases are released, they can provide new information about the economy and the future direction of interest rates. This can lead to changes in implied volatility, as investors adjust their expectations for future market volatility.
Political events: Political events can also affect implied volatility, as they can create uncertainty about the future direction of the economy and interest rates. For example, a terrorist attack or a major political scandal could lead to an increase in implied volatility.
Technical factors: Technical factors, such as the level of trading volume and the price of the underlying asset, can also affect implied volatility. For example, if trading volume is high, this can lead to an increase in implied volatility, as investors are more willing to pay for options that protect them against unexpected price movements.
The Federal Reserve's economic projections are a set of forecasts for key economic variables, such as GDP growth, inflation, and unemployment. These projections are released eight times per year, following each FOMC meeting.
The correlation between implied volatility and the Federal Reserve's economic projections is not always clear-cut.
In general, implied volatility tends to be higher when the economic outlook is more uncertain. This is because investors are more likely to demand protection against unexpected price movements when they are less confident about the future.
"Don't rely on luck alone. Develop a systematic approach that accounts for uncertainty and seeks to capitalize on opportunities."
This quote highlights the importance of understanding and managing uncertainty in order to be successful in any field, including finance. Simons is a renowned mathematician and hedge fund manager who founded Renaissance Technologies, one of the most successful hedge funds in history. He is known for his quantitative approach to investing, which relies on rigorous statistical analysis and modeling to identify and exploit market inefficiencies.
This quote is a reminder that uncertainty is a fundamental part of the financial markets. There is no way to perfectly predict the future, so investors must develop strategies that can handle uncertainty and still generate profits. This can be done by developing a systematic approach to investing that takes into account the different sources of uncertainty and seeks to capitalize on opportunities when they arise.
Jim Simons also said:
"The market is a complex system, and it is impossible to predict with certainty what will happen in the future."
"The best way to deal with uncertainty is to embrace it and develop strategies that can handle it."
"Uncertainty is a source of opportunity, as well as risk. Those who can best manage uncertainty will be the most successful."
Yesterday's published trade idea:
On September 14, 2023, I recommended a non-directional strangle trade on the QQQ index, which is currently up 22% in less than one day. I believe that when implied volatility is rising, it is often more profitable to bet on volatility than on the direction of the market.
Implied volatility (IV) is a measure of how much uncertainty there is about the future price of an asset. It is calculated using the prices of options on that asset. The higher the implied volatility, the more uncertainty there is about the future price, and the more expensive options will be.
FOMC September 20,2023:
The Federal Open Market Committee (FOMC) is the committee of the Federal Reserve System that sets monetary policy for the United States. The FOMC meets eight times per year to discuss and decide on interest rates and other monetary policy measures.
The FOMC meetings are often followed by a spike in implied volatility, as investors try to gauge the impact of the meeting on the future direction of the market. This is because the FOMC meetings can have a significant impact on asset prices, and investors are uncertain about what the outcome of the meeting will be.
For example, if the FOMC decides to raise interest rates, this could lead to a sell-off in stocks, as investors become more risk-averse. This would increase implied volatility, as investors would be more uncertain about the future price of stocks.
Conversely, if the FOMC decides to keep interest rates unchanged, this could lead to a rally in stocks, as investors become more optimistic about the economic outlook. This would decrease implied volatility, as investors would be more certain about the future price of stocks.
In general, implied volatility tends to be higher around FOMC meetings, as investors are more uncertain about the impact of the meeting on asset prices. However, the correlation between implied volatility and FOMC meetings is not always perfect, and there are other factors that can also affect implied volatility, such as economic data releases and political events.
Here are some other factors that can affect implied volatility:
Economic data releases: When economic data releases are released, they can provide new information about the economy and the future direction of interest rates. This can lead to changes in implied volatility, as investors adjust their expectations for future market volatility.
Political events: Political events can also affect implied volatility, as they can create uncertainty about the future direction of the economy and interest rates. For example, a terrorist attack or a major political scandal could lead to an increase in implied volatility.
Technical factors: Technical factors, such as the level of trading volume and the price of the underlying asset, can also affect implied volatility. For example, if trading volume is high, this can lead to an increase in implied volatility, as investors are more willing to pay for options that protect them against unexpected price movements.
The Federal Reserve's economic projections are a set of forecasts for key economic variables, such as GDP growth, inflation, and unemployment. These projections are released eight times per year, following each FOMC meeting.
The correlation between implied volatility and the Federal Reserve's economic projections is not always clear-cut.
In general, implied volatility tends to be higher when the economic outlook is more uncertain. This is because investors are more likely to demand protection against unexpected price movements when they are less confident about the future.
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