Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. In honor of Halloween, I want to talk about the scariest thing about selling options and actually, the reality is I’m going to talk about two things that should really scare you when selling options. Not that they should scare you enough to completely walk away, but it should be scary enough that you should try to build in some sort of model or strategy to counteract some of these things in the market. The two things for me are sequencing risk and autocorrelation. These two topics in all honesty, are never talked about when it comes to options trading. I don’t hear it talked about anywhere in the marketplace. I hear it rarely or vaguely mentioned, but it’s really not something that people teach in-depth like we do. The first one is sequencing risk which is just what it sounds like, a bad sequence or string of trades that has nothing to do with the underlying system being broken or default. And so, when you look at say a 50/50 coin flip where you have heads and tails, the expected outcome is always that you have an equal distribution of heads and tails. If you were to flip the coin 10 times, you would expect five heads and five tails. But what if you flip the coin and you got 15 heads in a row? That is not a likely scenario, but it’s possible. In fact, the probability of that happening is less than a fraction of a percent, but it is a possible outcome. Now, does that mean that the coin is broken, that it’s defaulted, that it’s a scam coin, that it’s a fake coin? No. It just means that you ran into a random sequence of bad trades and that the coin will still ultimately get towards its expected outcome given enough occurrences. That can be very hard for traders to understand why they run through just a really bad sequence of trades. They think that their trading is bad, the strategy that they’re using is wrong, the position sizing is off, the tickers that they’re using are not the right tickers, but in many cases, it might just be you ran through a bad sequence of trades. This also creates another problem which is how do you make sure that you have enough capital, so that if you do run through a string of 15 or 20 losing trades in a row which is highly unlikely to happen, but has a small probability of happening even if it’s a fraction of a percent, how do you make sure that you survive that environment? We build in stop gaps to make sure that we do that. The next thing I’m really scared about when selling options is autocorrelation. Now, we’ve done a lot of research on this and I would dare to say that what we found as far as autocorrelation is like what nobody else has really presented. We’ve heard people talk about things like a rising tide raises all ships or markets move together in black swan events, right? We’ve heard this kind of mentioned, but never really seen anybody present it like we presented it to our members just a couple of weeks ago. And autocorrelation basically is this idea that when markets become very volatile, they basically start to auto-correlate to one. They start acting like one position. When you start building out your positions in your account, you might have a diverse set of tickers. You might have stocks and bonds. You might have retail and healthcare and emerging markets and precious metals. But what we found in our research is that really, over the last couple of cycles, when stocks become very volatile, in particular, when the S&P and the VIX start to become very volatile, things actually start to auto-correlate together towards one and what that means is that basically, all the diversification benefit goes out the window in black swan bear market type environments and that’s really scary because you have this huge diversified portfolio and just when you need all that diver