Option Trading Blog

There is something that bothers me lately. Too many people have lost their independent thinking and rely too much on people who have questionable motives at best. In these days when knowledge is available on the internet freely, there is no excuse anymore to not grab the bull by its horns and do your own research about things. Whether it’s that sure fire method to bring you 100% profit in the stock market or just some recent research that you should eat cockroaches because it is healthy, there is no substitute for common sense.

If you reside in Israel then you probably know who Uri Geller is and have watched his new show that recently aired in Israeli T.V. In his show he tries to find an “heir” to himself as the next new psychic.

People know me as a skeptic and of course have approached me and said “Did you see the last thing Uri Geller did on his show? It was amazing he has such energy”. I have seen the show for educational purposes so I could figure out myself how they did any tricks in the show. Here is one trick done by one of the “heirs”. See if you could figure it out yourself.

The performer (or self proclaimed psychic) invites two people from the crowed. He tells the two that they have a special bond between them. Then he proceeds on telling one of the people to close their eyes and when asked, to report if they have felt any sensation in their body. Then he shifts his attention to the other person. He shows the audience that he is about to touch the person in his back. He proceeds on touching the person in the back so everyone could see. He then goes back to the other person who is still with his eyes closed. He tells the person to open his eyes and tells him if he has felt anything in his body. Remarkably he felt a touching sensation in his back. So instead of people trying to find a logical way this could be done, they assume the least common sense way which involves the person having a sort of energy about him.

Lest you think this happens only in non academic circles, here is a quick example: Two months ago there was a a report in the news that the average Knesset member, which is the Israeli Parliament, is overweight. While this may be true, the method in which it was done was far from scientific. I would imagine they would either just weigh all the members in the Knesset (total of 120) and average or at least take most of them and make a statistical exam. That is common sense. What I discovered was far from it. They did not weigh even ONE person. The nutritionist that published this result claimed she has a gift of guessing the correct weight of the people just by looking at them!! With all due respect to the nutritionist, these sort of claims bring science to the dark ages.

Getting back to finance now, because after all, this blog after all is about finance. I have recently seen an ad in the newspaper about a seminar in which a Nobel Prize winning method would be taught to make money in the stock market. I was intrigued. Apparently, it was the CAPM model that would be taught. For those who do not know, the CAPM is a landmark theory to price stocks in the stock market. The seminar would cost thousands. And what is the alternative you say? just open the internet and google : CAPM. Not only would you be able to learn it yourself, but you’d have links to books who cost the money of the fuel cost to go to the seminar.

Too many people in the finance community take seminars, listen to gurus and follow their advice like a cult. These gurus can probably show them some method to price an option not knowing that this method was invented 30 years ago and they could easily get the same method the guru is using just by going to the library and picking a book that would cost them nothing. Not only you would benefit from it, you would also learn about the shortcomings of that particular method.

I advice you to to go about this in any venture you want to learn more about. Don’t forget to use your common sense. Remember the quote in the top of this blog: “Science is the belief in the ignorance of experts”