The head of our research team, Michael Rechenthin, has a Ph.d. in Data Science. It’s why we call him Dr. Data. Today he joins the guys to show how we can use the tools of Data Science to identify inefficiencies that can cost us time and money.
Mike starts off with an example that anyone who has worked in an office can understand. A picture is shown of the tastylive kitchen area. Jules is hogging the toaster and Mike is fourth in line, impatiently waiting to toast his bagel. Mike then went through the math to show how much employee time was wasted waiting to use the toaster. Buying a better toaster that could toast more bagels at the same time would lead to an annualized Return on Capital (ROC) of 900%. Tom joked, “This might be the reason that we don't send our kids to get a Ph.D.”
Mike then examined the traffic congestion caused by construction on Halsted Street. It’s a busy north-south corridor not far from the tastylive studios. Mike used conservative estimates of the time wasted by commuters in traffic. The amount of time wasted was remarkable.
Now that Dr. Data had everyone’s attention he focused on something that can really make traders more money. A table showing capital efficiency in portfolio management was displayed. The table included our core strategies of a short Straddle, short Strangle and short at-the-money (ATM) Put. Mike compared the P/L on each strategy at expiration versus the P/L when managed at a percentage of the initial credit received (25% for the Straddle, 50% for the Strangle and 50% for the ATM Put). Mike demonstrated that while we make more money on average at expiration, it is not as capital efficient as managing positions. It isn’t even close. The return per day is far superior if we manage our winners.
Watch this fun and informative segment of Skinny on Options Data Science with Tom Sosnoff, Tony Battista and tastylive’s research team leader Michael Rechenthin, Ph.D., for the very important takeaways and to show how while we may not always be able to be efficient in everyday life being capital efficient can make a huge difference in our trading.
This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.