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The Skinny on Options: Abstract Applications

Imperfect Information

The Skinny on Options: Abstract Applications

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Generally speaking, when you head down the rabbit hole that is Imperfect Information, you quickly find yourself in a discussion centered on “informational asymmetry”, or any situation where the two parties involved in a transaction possess varying degrees of information. As a result, the party with more information has an advantage. While this was certainly the case back when Tom and Tony traded in the pits, our objective today is to actually highlight an altogether different element of Imperfect Information: uncertain outcomes.

As traders who must make real-time decisions in the face of extreme uncertainty, we are constantly exposed to imperfectly-informed conditions, and as a result, it is of paramount importance that we remain as objective and unbiased as possible.

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