Hey guys, I want to try and take some profits on quad witching day coming up on June 21st and hopefully I could get some help from you (Chatgpt was a bit useless):
So as we know QWD’s are very volatile and have sharp swings in price until it eventually picks up a trend (most times). Can you explain to me what makes the trend? For example -Hypothetically If there is a ton of open interest in 540 SPY calls and puts that expire on a QWD, and the price on that day is below 535 – Is it expected that the trend will be downwards since the calls won’t get exercised and the puts will? And people hop on that trend and fuel the downward rally even more? (This is simply a hypothetical scenario and I am not implying anything)
Thanks in advance, I really appreciate it, forgive me if my question is ignorant.
Posted by 54321rome
3 Comments
Do you really think that all these companies, with billions of capital, state of the art technology and experienced people who mostly never did anything except trying to figure out how to make money in the markets will leave the door open for profitable opportunities so that someone using chatGPT or reddit subs can make some quick money without knowing anything about financial markets?
Your question is indeed ignorant but that’s okay, I’m not calling you dumb or anything as it’s a valid question for someone just learning.
The two biggest things you should learn is:
1. There is no “outsmarting” the market. You have no edge and there’s no edge for you to ever have as a retail trader. Think for a second how large the financial industry is and how many gigantic funds there are employing full time analysts and strategist to watch every second of every metric armed with optimized algorithm bots and tools that can react faster than the signal from your computer can get to the servers. Think about how quants are top top software engineers with extensive experience and knowledge of the markets who get paid 500k+ full time to gain the slightest of edges for their employers. What kind of knowledge do you think you can gain from chatgpt (which isn’t really that intelligent and just regurgitates general knowledge on topics and is not immune from being totally incorrect) and reddit discussions where other users might have an active reason to lead you astray because they are betting against you? Even your theory of what you think will happen on qwd… do you really think that’s some sort of unique thought that’s not something super obvious that these industry quants and traders aren’t aware of? Do you not realize that when you win at an options trade, somebody else loses? You’re playing against an opponent that you are vastly underestimating. This isn’t to say that you can’t be right sometimes and profit. At the end of the day, it’s no different than going to Vegas and betting a certain way because you have a theory of how it might play out. Which leads me to the second point.
2. Intraday movements and even day to day movements are for the most part random. There’s really not a lot of “reason” for it and trends themselves are pretty irrational. Sure there are factors that will influence the movements, like company/economic news as well as things like overbought/oversold pressures, but all of these factors put together makes the market move very erratically. No indicator is anywhere close to being perfect. So while it’s not truly random, it essentially is. You’ll never reach the next level of trading success until you accept this as a rule. It’s just random and there’s no logic to it. It will go up and it’ll go down like it has a kind of its own. Once you accept that, you’ll finally realize how much of all of this is no different than gambling at the roulette table. The only real rule that has been shown to work time and time again is a super boring, unsexy one: over a long time span (5-10 year time span) the general stock market tends to creep upwards due to the growth of the American economy and the way social security works. Everything else, you’re better off accepting that the movement is random and not predictable.
All that being said, let me address your theory: I think you probably have a 40% chance of being right and making money and a 40% chance of being wrong and losing your entire bet. The final 20% is that qwd is overblown and the market just stays flat. There’s been tons of qwds that stay flat. The suggestion that qwds are volatile might be antiquated from a time before the proliferation of algo bots and daily expiries.
What’s your horoscope say for tomorrow?