- Be an avid reader. Read carefully and critically, but be selective and read only from high-quality sources: The Anti-Reading List
- This is an outstanding article: Overcoming Investor Indecision
- Is the Bull Market About Over?: Thoughts on the 7-Year Anniversary of the Current Bull Market
- Why Stocks Outperform Bonds: Link
- Schwab Market Commentary: Reasons for Recent Rebound in Global Stock Markets
- In behavioral investing, there has been substantial research on cognitive biases. A foremost problem for investors is termed 'loss aversion'. Simply stated, we like to win but we hate to lose; and we feel the pain from losses about twice as much as we receive pleasure from gains: Counteracting 'Loss Aversion' Can We Profit from 'Loss Aversion'?
Because many investors suffer from the cognitive bias of 'loss aversion', they frequently buy out-of-the-money Put options to establish loss limits in their long stock positions. These Put buying pressures can artificially inflate the price of these Put options above their expected realized value, thereby creating an opportunity for us option sellers (think selling out-of-the-money 100% cash-secured Put options) to profit from these investors' fears (i.e. their 'loss aversion' cognitive bias behavior).
Hope you enjoy the articles I've selected and find them useful.
Best wishes and Godspeed,
Jeff (the Covered Calls Advisor)