Let’s face it, we have all been very very naughty over the past decade. And it was great fun while the easy money lasted but those days are over now and alas it is time to adjust our trading accordingly.

Clearly Santa is in a very foul mood this year and he’s not taking any prisoners, as a matter of fact he and his intrepid elves are working overtime to dish out some mighty comeuppance to any bag or purse holders.

I am somewhat occupied today but since we are clearly heading into rough waters I decided mix things up a bit and do a blast from the past which may benefit especially some of my newer readers. If you think the past year has been rough for you then understand what may loom straight ahead will test your mettle and skills in ways you may be unprepared for. This post aims at highlighting a few common misunderstandings and confusions that traders from all stripes seem to chronically fall prey to.

I just sent out an update to my VIXEN subs and thought that this may actually make for a great educational post for the rest of my crew. So, if you’ve visited here for a while then you are probably aware that I have studied implied volatility for many years now. I practically sprinkle it on my cornflakes in the morning. And over time I learned a few things that later turned out to be extremely valuable to my own trading and I hope to the rest of you guys.

Here’s the quick and dirty on the current situation: The past week managed to effectively wipe out three months of upside progress across equities. Beyond the obvious carnage what I found most interesting is something a bit more obscure and thus it often escapes the average trader: A shift in market behavior as evidenced by the failure of three consecutive BDFD lottery tickets. It’s a bit like not seeing the forest for all the trees. Let me explain.