Di Krass
@Di_Krass_ • 1,835 subscribers
math · quant · markets · AI the edge hides where nobody's looking.
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Every trader believes he picks the best price. A behavioral economist proved a worthless option, slipped in beside it, picks for him. Dan Ariely - behavioral economist at Duke, wrote "Predictably Irrational." "we're susceptible to all of these influences from the external forces." The Economist sold three plans: web $59, print $125, both $125. nobody takes print-only - it costs the same as print plus web. but sitting there, it makes "both" look like a steal. drop it, and buyers flip to the cheapest plan. your edge works the same. a worse trade parked next to yours makes yours look obvious - and you take it because it looks smart, not because it is. Ariely laid it out in one TED talk, free. millions watched. it changed almost nothing. the edge was never the price on the screen. it is what sits next to it. watch it, and don't forget this.
Di Krass707,079 görüntüleme • 5 gün önce
Wall Street doesn't predict prices - it prices the randomness in them. That is where the billions are, and it runs on one equation. The model trading desks actually use is Geometric Brownian Motion: dS = μS·dt + σS·dW μ (drift) is the slow expected trend. σ·dW is the random shock - a coin flip scaled by volatility. It is the engine under Black-Scholes, the formula that prices trillions in options. The idea is 125 years old. Louis Bachelier modeled prices as a random walk in 1900 - five years before Einstein used the same math for particles. His verdict: "the mathematical expectation of the speculator is zero." Sixty years later Eugene Fama won a Nobel for the same finding: prices are "no more predictable than the path of a series of cumulated random numbers." And the math is brutal. Drift grows with time (t); noise grows only with its square root (√t). Over one day the shock buries the trend - so daily direction is a coin flip, and traders invent reasons after the candle prints. The trap hides in one assumption: that returns are "normal." Real markets have fat tails. Black Monday 1987 (-22.6% in a day) was a 20-sigma event under the bell curve - impossible in billions of years. Nassim Taleb calls that bell curve "the great intellectual fraud." The equation that prices everything is blind to the one day it matters most. the edge was never the trend inside the wiggle. it is knowing how much of the wiggle is nothing. the full quant build is in the article below.
Di Krass251,980 görüntüleme • 4 gün önce
Every option trader believes he is forecasting a price. He is not. He is trading the market's probability distribution, priced before he arrived. Stephen Blyth ran Harvard's $37 billion endowment. His MIT lecture. "option prices, they're just probability distributions." line up the call prices across every strike, take the second difference, and out falls the exact probability curve the market is using. the prices ARE the distribution. you never had a view on where the stock lands. you bought a shape someone else already drew, priced to the cent. MIT filmed it and left it up for free. 69 minutes. Years online, and almost nobody has ever used a line of it. the edge was never predicting the price. it is reading the odds already inside it. watch it, and don't forget this.
Di Krass116,910 görüntüleme • 11 gün önce
every trader believes the stock market is skill and sports betting is luck. the greatest gambler who ever lived is proof it runs the other way. Billy Walters - the most successful sports bettor alive. 36 years without a losing year, all of them spent trying not to be seen. "you have to find things that no one else finds. you have to be able to see angles that no one else can see." his reason: a company reports four times a year, a team has to report every injury before kickoff - so the information in sports is far more even. then he pressed that edge with size, putting a million or two on one game, disguised across 1,700 accounts run out of an office in Panama. the transparent game never touched him. the stock market did - an insider-trading case he denies, 31 months in federal prison. it is all in one 40-minute interview, free. most people never reach the part where he explains how. the edge was never the game that looks respectable. it is knowing which one you can actually measure. watch it, and don't forget this.
Di Krass77,808 görüntüleme • 8 gün önce
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