Recent anecdotes of day traders tripling their net worth with OTM call options after “in-depth” price chart analysis have led to a somewhat distorted view on investing in general and stocks in particular. It is in times of such optimism (or exuberance) that turning to great investors like Joel Greenblatt might allow for a more grounded understanding of what exactly it is that investors are ultimately betting on when trading options or buying or selling shares.

“Stocks are […] not pieces of paper that bounce around that you put Sharpe ratios and Sortinos on […], they’re ownership shares of businesses that you value and try to buy at a discount.” — Joel Greenblatt [1]

What this suggests is that investors who want to outperform the market for a sustained period of time should not approach this goal by recklessly trading in the options market. Rather, Greenblatt suggests that any approach to active investing should be informed by an analysis of fundamental company data.

#finance #python #streamlit