thinkMoney - Fall 2020 - 49

October 2020

In this issue:

  • What's Shakin'? Volatility. That's What.
  • The Win/Loss Conundrum: Understanding the Odds
  • Black Box Trading for the Rest of Us (Sort Of)
  • Puts & Ladders for your IRA

One Step at a Time

• THERE’S UNIVERSAL uncertainty in the air as we look to see what the end of 2020—and beyond—will bring. The pandemic, U.S. elections, and the civil unrest that erupted over the summer put forward more questions than we have answers. All of which leads to the biggest question of all: Where do we go from here?

In times of crisis, we often think about how to keep our financial lives healthy to provide for ourselves and our loved ones. Just because the stock markets recovered from the COVID crash doesn’t mean we should be complacent. Markets eventually come down, and traders need to be prepared for all markets.

The market rally has been fueled by high volatility (vol). Higher vol means more uncertainty, but it also opens up potential trading opportunities. That said, traders should know how to navigate volatile markets. “What’s Shakin’? Volatility. That’s What” on page 14 explores different ways to analyze vol and strategies you could apply in different scenarios.

If there’s one thing COVID-19 has taught us, it’s to be ready for anything. It’s a good idea to have checks and balances in place so you have a systematic way of tackling, not just the financial markets, but all aspects of life. It may be helpful to have a plan A, maybe something similar to what you’ll find in “Black Box Trading for the Rest of Us (Sort Of )” on page 24. And if things don’t work out like you thought, plan B kicks in.

No doubt 2020 has brought some tough challenges. But what makes this time in our history so appealing is the opportunity to come together, to make positive change, and to reset things when they become misaligned. It’s in our nature. The capital markets are a tool to be used in that process, and wherever they go next will be a product of collective optimism and fear working at the same time. Optimism (and money) drove much of the incredible recovery from the bottom of the collapse in March. It was a clear sign that investors have been hopeful. But it’s not a prediction of the future. Hope drives change as much as fear.

Be safe, and trade with caution.

Happy trading,

Kevin Lund

Editor-in-Chief, thinkMoney