
Retail Options Trading

T h e R i d d l e o f T h e C o r r u p t C a s i n o
Andrew Mack • Retail Options Trading
Process uncertainty refers to the randomness inherent in the outcomes of a probabilistic system. For example, the outcome of a single coin toss is a form of process uncertainty.
Andrew Mack • Retail Options Trading
Parameter uncertainty can lead to model risk, where our assumptions about the underlying process are incorrect, resulting in flawed expectancy estimates and subsequent poor decisions.
Andrew Mack • Retail Options Trading
There are two types of edges, trades that we expect to be profitable: risk premia and inefficiencies.
Andrew Mack • Retail Options Trading
For a strategy to have a positive expectancy, the expected value E must be greater than zero. If the expectancy is zero or worse, it’s not a game in our best interest to play.
Andrew Mack • Retail Options Trading
The formula for calculating expectancy is:
Andrew Mack • Retail Options Trading
It measures fluctuations in the returns of an asset over a specific period, with higher volatility indicating greater uncertainty due to a larger distribution of possible outcomes.