SWAG of the 0-DTE Trader
By Ernie Varitimos
October 13, 2022
0:00 / 21:58
SWAG of the 0-DTE Trader

How you doing friends? This is Zero Days to Expiration. This is podcast number 1 0 1, and today's episode is, Today's episode is the SWAG that makes zero DTE traders. So when I say SWAG, that sounds like a sort of a hip hop word or something like. But it is actually an acronym and I believe, I'm not sure exactly the origins of this acronym, but it does refer, and the acronym acronym is S W A G

. Scientific Wild Ass Guess.

Now, that doesn't mean that it is BS. It's not a a BS guess it's an educated guess. It's something that's based on experiential things. It is something that is also based, maybe loosely on scientific principles, but sometimes we don't have the ability to apply all of those principles directly.

We just understand the nature of it. And so we look towards that with that understanding and are able to make, uh, valued judgements. And most of trading is like that. Virtually all discretionary traders do a SWAG, right? So that is also what is here. But now this particular strategy though is born out of very serious mathematics and also philosophy.

Much of it is borrowed from the greats such as Benoit Mandelbrot and Nassim Taleb, and I would highly recommend all of their works.

So the things that we do are, are firmly embedded in that stuff. And it was created, I started the service because of a fundamental disconnect between traders and their notion of what risk is.

And if you just look at what is the most popular type of strategy that you. Think of, Well, it's anything that someone says is high probability, right? Everyone is attracted to the idea that they're going to be winning a lot, and the reasons for it are very human, and those reasons are it, uh, it makes us feel good to win a lot.

The problem with a high probability strategy is that you, you do not really take into account the caveat to having a high probability strategy and that caveat or the thing that is behind the scenes is the fact that high probability strategies usually have extremely high risk. There may be a lower incident of actually hitting that risk, but it's certainly there.

But it goes further than that.

When you start looking at the way pricing models are, the way options are priced, the way virtually everybody prices their risk into their trade. It is completely understated, and they don't believe that. They want to believe that the fact that they are going to put a 95% probability strategy on and win 95% of the time, and those times that they lose, Oh, they can, they can handle that.