TAILIEUCHUNG - Stock Market Wizards Part 6

Questioning the Obvious. If John Bender is right about options*—and, given his performance, there is good reason to believe he is—then virtually everyone else is wrong. Bender asserts that the option pricing theory developed by Nobel Prize-winning economists, which underlies virtually all option pricing models used by traders worldwide, is fundamentally flawed. | MICHAEL MASTERSl but he also has a plan for liquidating trades. He will exit a trade whenever one of the following three conditions are met a his profit objective for the trade is realized b the expected catalyst fails to develop or the stock fails to respond as anticipated c the stock fails to respond within a predefined length of time the time stop is triggered . JOHN BENDER Questioning the Obvious If John Bender is right about options and given his performance there is good reason to believe he is then virtually everyone else is wrong. Bender asserts that the option pricing theory developed by Nobel Prize-winning economists which underlies virtually all option pricing models used by traders worldwide is fundamentally flawed. This contention is not just a theoretical argument Bender s entire methodology is based on betting against the price implications of conventional option models. Bender places trades that will profit if his model s estimates of price probabilities are more accurate than those implied by prevailing option prices which more closely reflect standard option pricing models. Bender has maintained a surprisingly low profile in view of the large sums of money he is managing and his excellent performance. His fund did not show up in any of the industry databases I checked. As was the case for the majority of interview subjects in this book and its two predecessors 1 found Bender through networking with industry contacts. Bender graduated with high honors from the University of Pennsylvania in 1988 receiving a degree in biophysics. During his summers as an undergraduate Bender held several scientific jobs including positions at Livermore Labs and the Marine Biological Laboratories at Woods Hole. Although he liked science he was disenchanted because the career scientists he observed were forced to spend much of their time seeking grants instead of doing research. At the same time he became intrigued It is recommended that readers unfamiliar with options

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