Investment is a game—the game of seeking certainty.

While both certainty and uncertainty can deliver short-term profits, only certainty sustains long-term success. Money isn’t made because the market moves up or down; it’s made because we’re right about the direction it will move.

Every financial decision—actually ALL decisions in life—boils down to cost and return. But cost and return are proxies for certainty. When we analyze them, we’re really examining their magnitude and probability. Both dimensions converge to define how certain we can be about an outcome.

The options market embodies this trade-off with brutal clarity. Hundreds of contracts, each with unique cost-return profiles, present themselves for selection. A call option with a strike two standard deviations away costs less than one just one deviation away. The price adjusts dynamically: increased volatility raises the likelihood of profit for buyers, driving up contract prices. And vice versa. The balance between cost and return is constantly recalibrated by the underlying market dynamics.

In an efficient market, this equilibrium renders most opportunities statistically neutral. Every price reflects an equal chance of moving up or down—an idea central to the Binomial Option Pricing Model. For a long time, this felt counterintuitive, but now it makes perfect sense.

That’s why we should be thankful the world isn’t perfectly efficient. In its imperfections lie opportunities—edges that tilt the scales of certainty in our favor. These edges come in many forms: tools, knowledge, access, intelligence, and, most importantly, an enhanced mindset that cultivates all of the above.

But there’s one edge we can never claim—time. Time is the great equalizer, immune to strategy or innovation. It humbles us all, reminding us to seek certainty not just for profit, but for clarity, purpose, and resilience in a world that’s anything but predictable.

<aside> <img src="/icons/info-alternate_lightgray.svg" alt="/icons/info-alternate_lightgray.svg" width="40px" /> © Zihan Chen | Site Updated 2024/12/12

</aside>

$$ \color{white} To \space see \space the \space things \space that \space I \space wasn’t \space able \space to. $$