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      Market Data provided by CME Group & powered by dxFeed Technology. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
      The Skinny on Options: Abstract Applications

      Fear Conditioning and Extinction

      Sep 3, 2019

      For as black/white and cut/dry as we make trading, there will always be an unavoidable emotional element. We saw this with Prospect Theory, and how we tend to process gains and losses very differently. Today, we continue that discussion by digging deeper into behavioral psychology and the biases we develop, with the ideas of Fear Conditioning and Fear Extinction.

      Simply put, both Fear Conditioning and Fear Extinction are learned behaviors. If we walk into an outlier move with our short premium position, we can be conditioned to associate fear with short premium. Similarly, if we nail a stock’s direction with a long premium trade, we can be conditioned to think we can predict direction. Both of these associations do not depict reality, and would thus need to be unlearned over time.

      This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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