Nishant Pant - Mean Reversion Trading: Using Options Spreads and Technical Analysis

Contents

Mean Reversion Trading

A complete trading system using Technical Analysis to identify trading opportunities and Options Spreads as the primary trading vehicle.

Includes rules for entering and exiting trades, stop losses, trade management, portfolio allocation, and risk management.

Copyright 2022 by Nishant Pant

All rights reserved.

Disclaimer

The content in this book is for informational and educational purposes only, and you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this book constitutes a solicitation, recommendation, endorsement, or offer by the author of this book to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

All content in this book is information of a general nature and does not address the circumstances of any individual or entity. Nothing in this book constitutes professional and/or financial advice, nor does any information on the book constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. The author Nishant Pant is not a fiduciary by virtue of any persons use of or access to the content of this book. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information in this book before making any decisions based on such information or other content.

There are risks associated with investing in securities. Investing in stocks, bonds, exchange traded funds, mutual funds, and money market funds involve risk of loss. Loss of principal is possible. Some high-risk investments may use leverage, which will accentuate gains & losses. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods. A securitys or a firms past investment performance is not a guarantee or predictor of future investment performance.

Dedication

This book is dedicated to my beautiful and loving wife, my life and soul partner. I feel that one of the most challenging jobs in the world might very well be, being a serial entrepreneurs wife. Without her encouragement and support for everything I have done, this book wouldnt have been possible.

Why am I rebranding this book?

My father was an incredibly loving and intelligent man who obtained a masters degree in economics at the young age of 19. Although a middle-class guy in India, with hardly any disposable income, he wasnt afraid of experimenting and had a deep interest in the world of investing. I remember him talking to my mother about shares and debentures all the time, but that was the extent of knowledge I could ever extract from him. They were just words for me, nothing else. When I was 15 years of age, he was misdiagnosed with a stomach ulcer when in reality, he had cancer. My family lost him in 3 short months.

Maybe the seeds of getting into investing were planted in me by being around him, but I never got a chance to learn anything concrete. I had to start from scratch and learn everything by fire.

This book in its original form was named $25K Options Trading Challenge , a tiny little handbook of 95 pages explaining a trading method that, under the right market conditions, had the potential of generating outsized returns for your portfolio. In my own case, the challenge meant growing a tiny $2500 portfolio to $25000 under the right market conditions. The motivation for writing that book was to capture my years of knowledge and experience with the stock market in a format that I could gift to my daughter when she grows up. Instead of feeling like a boring textbook that goes into painful details about the Black Scholes Model or how the rate of change of vega is called Vomma, I deliberately chose a very casual storytelling-type narrative approach. The goal was to open up her eyes to the incredibly rewarding (and many-a-time treacherous) world of investing. That way, she could benefit from my trials and tribulations and build on my knowledge instead of starting from scratch.

After I finished writing my handbook for my kid, I was encouraged by my wife and friends to publish it because they saw value in the method that the entire trading community could benefit from. I am incredibly grateful that the previous editions of this book have been welcomed by thousands of traders. The book has also been a best-seller on Amazon for 3-straight years.

I am rebranding the book by taking away the "challenge" aspect and removing any specific profit targets in the title so that I can focus on the concepts and methods being taught instead. This strategy can be applied to an account of any size, so as traders practice the method and get better at it, they can choose their own "challenge targets" that suit their individual skills and risk tolerance.

My intention with this book is to share a rules-based system with the trading community that has worked incredibly well for me. I have offered a template, which, if applied with discipline and given the time and effort it requires to master, can yield amazing results. The concept revolves around Mean Reversion, which is not something that I invented. However, I did spend many years of my life developing rules around it so that it could become a repeatable trading system. I have shared those rules with my readers in this book, and I felt that Mean Reversion Trading is the appropriate name for this book which will share the message that I set out to deliver while avoiding any perceived profit targets.

What is new in this book?

I have revisited and updated almost all the content in this book. However, there are certain sections and chapters which might be of particular interest to you if you have already read the previous book.

Chapter 2 A Zero Sum Game? - The bear market in 2022 brought with it a lot of lessons. I have mentored over 4000 traders in the last two years, which has helped me develop a deep understanding of trader behavior and the behavioral traps we all fall into. I have highlighted some common booby traps of trading behavior that you should avoid at all costs in order to succeed in this business.

Chapter 9 Read the Markets like a Pro - You have no control over the markets, but the markets have total and absolute control over the outcome of your trades. It is critical to develop an understanding of the market weather for anybody to become a successful trader. In this chapter, I have shared deep insights into my daily routine and how I keep a close eye on the macro-economic environment.

Chapter 11 Handling Losers - In the previous editions of my book, I had mentioned that I cut my losers when I lose 50% of my initial investment. The rule sounds very simple, but when it comes to actual trading, you will encounter many shades of gray when faced with the decision of cutting a loser. In this chapter, I have taken a deep dive into the 50% loss rule. I have also introduced The PNR Method which helps you catch losing trades before they turn into full losers.

Chapter 14 Handling Market Corrections The year 2022 brought with it a massive six month long bear market. It also brought a ton of learning opportunities. In this chapter, I explain in detail how to handle market corrections with a special note on the 2022 bear market.

Chapter 15 Scaling up While explaining my whole trading method, I have deliberately kept account and trade size to small digestible numbers. I have done this because small numbers make the concepts in this book easy to grasp. However, the most popular question I get in my trading education group and emails from my readers is, I have a bigger account; how do I scale up this method? So I decided to dedicate a chapter to this topic.