I am reading this book, "Sway : The Irresistible pull of Irrational Behaviour", where it gives the psychology behind irrational decisions.

The first case study in it was the world's worst Air crash, the Pan AM - KLM crash in Tenerife, where 583 people were killed.

The more I read about the accident, the more I am convinced about fate and the role that it plays in our life.

Two 747s that crashed on that fateful day, weren't even supposed to be there. There were supposed to fly to the Gran Canaria islands with loads of Holidayers.

And they were flown by the most experienced people in their respective airlines. The KLM flight was piloted by Jacob Von Zanten, the airlines chief flight instructor. He had appeared in KLM ads, as a metaphor for safety and responsibility.

The Pan AM pilots were no slouched too.

Just when they were about to land, a small bomb went off at the Gran Canaria airport & there was a call that a second bomb had been planted

As a result the authorities closed the airport and diverted all the flights, including the Pan AM and KLM to the nearby airport at Tenerife

Event 1 just happened.

Now Tenerife airport is a very small provincial airport. It was not equipped to handle big 747s. But it had no choice.

Amidst a lot of smaller planes, both the flights landed and jostled for space. It was at this point, von Zanten started worrying.

28 Mistakes That Destroy The Financial Life Of people ---

A Mega Thread -

👇

Inspiration- @FI_InvestIndia @warikoo

Grab Your Cup ☕ of Coffee and let's Get Started --

1. Buying insurance policies for investment purpose:

Have you invested your money in insurance plan to get a return in future?

Big mistake! Out of 100 people I have spoken, 95 have made this mistake..

Very few people understand the difference between term plan, endowment plan, etc.

2. Not able to crack the credit card mystery:

Are you paying the minimum amount due on your credit card payment?

If yes, you are trapped in credit card mystery.

On the other side, very few people really enjoy the benefits like free lounge access, buy one get one movie ticket, etc.

Pyramiding 2.0

A thread-

What is pyramiding?

It is simply adding to your winners.

Why use pyramiding?

1. It makes your winners bigger than your losers.

• Because you are adding positions when your trades are going your way, you are increasing your gains but your losers will be small comparatively.

2. You lose less during Draw-down time ( it saves you from losing big during whipsaws )

• Many times when the market is in sideways mode, Entering a trade with full risk might not be the best idea.

• So, you test the waters with a small position first, it could be ⅓ or ¼ of your total risk.

• So if the Breakout fails or whipsaws come, then you will only lose a small part of your overall risk.

• Then when position starts to go in your favor you can add to it.

3. It helps you to concentrate on a few trades,

They say that don’t put all your eggs in one basket, but don’t put them in too many either.

• See, Everyone can see charts and find breakouts, pullbacks etc.

Some Simple Rules for Option Buying Setup!

You can change them as per your comfort.

THREAD ON IRONFLY

These days the most preferred strategy for option sellers due to improved margins is IRONFLY. It's essentially a short straddle with long strangle. Long strangle acting as 'WINGS', which help in capping the unlimited risk associated with a short straddle.(1/n)

You can also view the position as a combination of Cal & Put credit spreads, if that makes it more easy for you.

There are 3 important things to understand while trading this strategy:

1) Initial size of the Wings
2) Risk Management
3) Adjustments

(2/n)

Since we are selling an ATM straddle, the 1st question is how far our wings should be? Ideally i sell .50 delta straddle & buy .20 or .10 OTM strangle, depending on my view on volatility. So the distance of wings depends on the IV setup. Higher the IVs, greater the distance.(3/n)

If you don't understand greeks, then ideally with 30 days to expiry (dte), wings should be around 300pts either side. If your trading in weekly then it should be not more than 200pts. Higher the premiums, higher the distance as we have more cushion of theta. (4/n)

It is important to understand that we need to reduce the distance of wings with time so as to manage our RISK in gap openings or sudden volatile move. So for eg. if you started with 300pt wings with 30dte, the wings wouldn't give the same protection when there is 7dte. (5/n)