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Impossible Portfolio

For independent traders and investors

Trade with Pete

Coming soon: a service for active traders who are serious about mitigating risk and maximizing reward.

For Independent Traders

This service is for active traders. We do the math, so you don’t have to.

Our watch list consists of volatile markets and stocks found in the S&P 100 Index, NASDAQ 100, Goldman Sachs Hedge Industry VIP ETF, and the AI Powered Equity ETF. This list is ranked according to our proprietary metrics so that members can select the stocks and markets that fit their risk appetite and trading style.

Buy and sell levels are updated daily – these can be used to set stop losses or to set up bull call spreads and bear put spreads to maximize buying power and minimize risk.

The Bull Call Spread

“A bull call spread is a type of vertical spread. It contains two calls with the same expiration but different strikes. The strike price of the short call is higher than the strike of the long call, which means this strategy will always require an initial outlay (debit). The short call’s main purpose is to help pay for the long call’s upfront cost.” More at the The Options Industry Council.

The Bear Put Spread

“A bear put spread is a type of vertical spread. It consists of buying one put in hopes of profiting from a decline in the underlying stock, and writing another put with the same expiration, but with a lower strike price, as a way to offset some of the cost. Because of the way the strike prices are selected, this strategy requires a net cash outlay (net debit) at the outset.” More at The Options Industry Council.

Think and Trade Like a Market Wizard

“Anyone with average intelligence can learn to trade. This is not rocket science. However, it’s much easier to learn what you should do in trading than to do it. Good systems tend to violate normal human tendencies. Of the people who can learn the basics, only a small percentage will be successful traders.

If a betting game among a certain number of participants is played long enough, eventually one player will have all the money. If there is any skill involved, it will accelerate the process of concentrating all the stakes in a few hands. Something like this happens in the market. There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win you have to act like the minority. If you bring normal human habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose.

. . .

Decision theorists have performed experiments in which people are given various choices between sure things (amounts of money) and simple lotteries in order to see if the subjects’ preferences are rationally ordered. They find that people will generally choose a sure gain over a lottery with a higher expected gain but that they will shun a sure loss in favor of an even worse lottery (as long as the lottery gives them a chance of coming out ahead). These evidently instinctive human tendencies spell doom for the trader—take your profits, but play with your losses.

. . .

One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”

~ William Eckhardt, interviewed by Jack Schwager in The New Market Wizards: Conversations with America’s Top Traders

Maximize Gain, Not the Chance of Gain

Maurice Allais was awarded the 1998 Nobel Prize in economic science:

“Outside of the economics profession Allais is perhaps best known for his studies of decision-making under risk and what is generally known as the Allais paradox. He used this paradox to show that the theory of maximization of expected utility developed by John von Neumann and Oscar Morgenstern, which had been accepted by economists for more than forty years, is contradicted by empirical observations of human behaviour in some important decisions under risk. On the basis of these observations, Allais formulated a more general theory.”

Evolution of the Stock Market

As Gordon Gekko said in the film Wall Street, “The most valuable commodity I know of is information.”

RSS Indexology Blog

  • Balancing the Scales in U.K. Equity with the S&P 500 February 7, 2023
  • Good Things Come in Threes: Muni Bonds Appear Ripe for 2023 February 6, 2023
  • Record CDS Index Volumes As We Head into the 20-Year Anniversary of iTraxx and CDX February 3, 2023
  • 2023 GICS Changes: S&P 500 Impact Analysis February 3, 2023
  • 18-Year Performance of the S&P/ASX BuyWrite Index February 1, 2023
  • Commodities Flat in January After Second-Best Yearly Performance in Two Decades February 1, 2023
  • Examining the Dividend Risk Premium January 31, 2023
  • Net-Zero Targets and Temperature Alignment: Two Sides of the Same Coin? January 31, 2023
  • What Performance Reversals Suggest January 30, 2023
  • GICS Changes Are Approaching January 27, 2023

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