This gentleman has been in the market for 30 years without losing a single year. His name is called Edward Thorp and he uses a method called options arbitrage. Edward Thorp uses this method called options arbitrage and you can see if you have invested into his hedge fund called Princeton Newport Partners, you have been making money every single year. Now this beats even like Sequoia Fund who lost money in 1973 and 1974, even Charlie Munger who also lost money in 1973, 74. Even Warren Buffett wasn’t spared. However, Edward Thorp, you can see in 73, 74, he makes 17% a year beating the market that has lost almost 20% that year. How does he do that? He uses this method called convertible hedging. What it simply means is sometimes options gets mispriced and if they are overvalue, we sell them. If they are undervalue, we buy them. How can we search for under or overvalue options? I use this free website called Bar Chart and you go to Bar Chart, you can see a options tab. Click on it, you can see Options Calculator. This particular function helps us calculate the theoretical value of the options. Here I have an example of apple call option for 2, 2, 5 strike and the theoretical value is 6.26. It’s calculated based on a Nobel winning model called the Black Scholes options pricing model. And you can see right now the market option price is 6.29. There isn’t a huge Difference because the theoretical price is only 3 cents away, not much arbitrage opportunity. One way to look for arbitrage opportunity, it’s a look for stocks that are giving out dividends. That’s where options may be mispriced. Example, you can see Dell is issuing dividends today. And when we take a look at the theoretical value of Dell’s options, it is 5.89. Where else? The market price is 4.90. A almost $1 difference in the valuation. That’s where we can buy the options because it’s undervalue. To learn more about powerful options method like this, follow our channel and also click on the link to download Free Resources to make you a better investor.