Option pricing is one of the most powerful yet misunderstood tools in finance. Beneath all the jargon and math lies a fundamental question we’ve returned to throughout this series: How should we value risk? And beyond that, a more actionable one: What is the price and what is the value of the risk we’re trading?… Read more

In the markets, not every drop signals collapse, and not every crash is the end of the world. While dramatic moments draw headlines, most of the time the market simply fluctuates—within statistical norms. And if we’re living through one of those “normal” stretches, then we should respect the statistics. Many tough investment decisions come down… Read more

“The invention of marine insurance transformed the risks of trade from fatal uncertainty into manageable cost.”— Peter Bernstein As we discussed in Part 1, one of the keys to surviving—and even thriving—in financial markets is hedging. When markets fall, volatility spikes, or systemic crises hit, many investors suffer deep losses. But those who prepared—those who… Read more

We All Live With Risk Every day, we face risks:Car accidents.Job loss.Sudden health issues.Market crashes.Family emergencies. Sure, we’re often told to “stay positive” or “adjust our mindset,” and that’s important for mental health—but positive thinking doesn’t eliminate real-world risk. What actually protects you in a risky situation is preparation.And that preparation needs to happen before… Read more

In the stock market, insurance is essentially purchasing a put option. For the put option buyer, from an insurance perspective, the only significant drawback is the high cost, but aside from that, puts offer many advantages. However, to make the most of put options as a hedge, it’s essential to understand the associated risks and… Read more

The VIX term structure is a powerful tool for understanding how markets price volatility risk over different time horizons. It provides a window into investor sentiment and expectations about future market uncertainty. While many traders focus on short-term VIX movements, the shape of the entire term structure holds crucial insights. In this post, we’ll explore:… Read more