The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. In honor of Halloween, I want to talk about the scariest thing about selling options and actually, the reality is I’m going to talk about two things that should really scare you when selling options. Not that they should scare you enough to completely walk away, but it should be scary enough that you should try to build in some sort of model or strategy to counteract some of these things in the market. The two things for me are sequencing risk and autocorrelation. These two topics in all honesty, are never talked about when it comes to options trading. I don’t hear it talked about anywhere in the marketplace. I hear it rarely or vaguely mentioned, but it’s really not something that people teach in-depth like we do. The first one is sequencing risk which is just what it sounds like, a bad sequence or string of trades that has nothing to do with the underlying system being broken or default. And so, when you look at say