How to Use Standard Deviation to Put Probabilities in Your Favor | From Theory to Practice

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[@aminmino4625]

never thought the thing i found most boring in school would be the most interesting thing i have discovered after i grew up, thank you sir.

[@clatechilders856]

Same!

[@lazy1peasant]

👎Stock price movements don't follow the normal distribution.

[@jeffreyjohnson7561]

Trade-by-trade, maybe not, but daily close prices (adjusted for dividends and splits) are.

[@lazy1peasant]

@@jeffreyjohnson7561 no they aren't. They have fat tails.

[@StraightCrushinn]

All fat tails say is outlier events happen more frequently than expected. It doesn't tell you exactly how much more frequently. You don't know how fat the tails are. There could be abnormal volatility every trading day or every once a month. But taking the market into account over a LONG period, the distribution does have fat tails, but it still looks very similar to a normal distribution. Fat tails come mainly from events like recessions/depressions, which are few and far between.

[@Tuxster3]

Correct! Stock PRICES don't follow a normal distribution, but stock price RETURNS generally do, while exhibiting "fat tails".

[@nabilfndy7537]

Stock price isnt, stock return yes.

[@donkndave7811]

Jim, or Tastylive, How is SD correlated to Delta? I have been under the impression that a 15 Delta corresponds to a 85% chance of success( or profit). Likewise, a 20 Delta is a 80% chance of success( or profit). Thanks in advance

[@AceofSpadeTrades]

SD is correlated to IV

[@scsmith4604]

This is why trading often and small is so important. Over the last 4 years of setting my strikes at 1 STD when doing Short Strangles my success rate is over 90% and as I learned to manage the trade during the trade duration I have learned to come in from 1 STD and still win the overall trade. Great information Jim!!

[@vmurthy6144]

Where can i find more information on this

[@Ryanj8031]

How many days to expiration do you usually do? I have been trading short strangles on SPX about 1 month to expiration and seeing similar results.

[@scsmith4604]

@@vmurthy6144 Tasty Trade, in my opinion, is the best resource for options education.

[@scsmith4604]

@@Ryanj8031 Usually 45DTE is where I start. There are several videos with Tom Sosnoff that do a deep dive into data analytics and that data indicates that 45DTE yields a better success rate when you manage the trade at 21DTE.

[@EvanEvansE3]

@@scsmith4604 Do you ever roll between when you put the trade on and 21DTE? For example if price has gone askew and you can roll for a credit or marginal debit in order to get it to fit back inside a 1SD window?

[@nw6091]

Thanks for posting. I think I'm a standard deviant.

[@dangilmore5326]

Awesome video!

[@wboquist]

Great introductory discussion. It would be great to have Dr. Jim do a similar presentation on skew, and how it should impact the decision-making process during entry/management/exit of a trade.

[@exsxpx1]

I use standard deviation on the RSI of a stock. Works well.

[@HedgeYourPosition]

How? On tradingview?

[@exsxpx1]

@@HedgeYourPosition I use it on a daily chart, but it's graphed on a excel spreadsheet.

[@yj677]

this is literally all i use to trade lol. its hard to pinpoint sometimes and im not a gajillionaire or anything but staying green over few years now.

[@StraightCrushinn]

My man

[@howardchueh5781]

But the financial series is not normally distributed .. but serially correlated .. prices go from 1,2,3 .. not 1 to 3 back 1 than to 2 .. 3 Bollinger band moves are the norm not the exception

[@jeffreyjohnson7561]

Should std dev (IV) be portrayed by calendar days (365) or trading days (252)? All the brokerages (I believe) use calendar days, with the idea being that information that can affect asset prices occurs just as readily over the weekend as M-F. If that's the case, then volatility on Mondays should be significantly higher than Tues-Fri -- but, empirically, it's not.

[@javamochafrap]

Are you talking about looking at a daily or hourly chart (bollinger bands) or any kind of chart ?

[@roberte.bainesjr.7164]

I am currently using standard deviation channels and like them. However, I'm hearing about regression channels which are similar but not the same. Is it correct to assume that you prefer standard deviation channels over regression channels?

[@Arashi_sage]

Hey sir can you recommend few of them ??

[@japaneseflea]

What happened at 5:30? Was he edited out or just a glitch in broadcast?

[@gapperx9068]

The "Shooter McGavin" Strat? Lol...sign me up!

[@mcdawgzy]

Very useful video, thanks for sharing!

[@jackbarhillel1065]

We'd have like some more about

[@JUDDLILIHA]

Thanks Doc...

[@nevinkuser9892]

That's the most useful trading video I've ever seen.