There's always a question in our minds about how to generate trade ideas. Should we source the ideas in the wild? Should we let them occur to us? Should we talk and listen and observe the market, and ponder what trades might make sense, given the price-action that we witness?

Or, alternately, should we ignore the rabble, close ourselves off from all the noise and the brokerage charts and the headlines—and find ideas simply by looking at the data that we've spent the last decade sourcing to give us an edge in the market?

The past month is a fun example of which method works better. And the current situation is a test of our resolve. Let's talk about that.

All we talked about this week was mean-reversion. Because that's what the data told us. "Buy the dip, sell the rip."

A Tuesday dip gave way to a 150-point rally, taking us back to the Monday highs, which subsequently rolled over, leaving us back at the Tuesday lows. A perfect encapsulation of a mean-reverting series. A chefs-kiss of a week for the dip-buyer-rip-seller (regardless of whether you caught the exact bottom and/or top).

In narrative space, the market is discussing war and oil. You could very well argue that neither of these things were being taken seriously earlier in the week—you'd probably be right. But by Friday at the close, a vol bid transpired, leaving VIX suddenly around 30.

It's unquestionably a bullish distribution, and the advantage is on betting on a face-ripping horror-show of a rally. A mean-reversion, with extra juice from high implied vol. The probability of upside is 72.8%. The mean 1-week return is 1.66%.

You don't need too much of an imagination to understand why it's a bullish scenario, and you can play with the data yourself with the interactive S&P 500 Chart. But suffice it to say that a VIX at 30 is generally bullish, particularly when realized volatility hasn't picked up that much.

Now, of course you could object that "this time is different." That war is upon us, and the wind has shifted and that a pale horse whose rider is named Death has begun riding in central Asia, and that we will begin seeing signs in the firmament—and you may very well be right.

But you must remember that equities are like a very stupid puppy. Every bit of horrific augury may be true, and the stock market can just... go up. Because why not? And if there's some mechanical, rational, time-tested reason to believe that upside is favored—why not carry a bit of long delta?

Will stocks crash 20%? Well, if you're worried about that, then carry only enough long delta that you'd still feel OK if that happened. Or, alternately, buy the 7000-strike OTM call with 0.15% of portfolio and then go for a long walk. It's easy to get worked up about these situations—let's try not to.

It's nice to think that your ideas, your inspirations, your mental prowess, are going to make you money when transmuted into a trade. What better symbol of the dominance of our intellect than to lord it over the whole globe and its markets by generating superior returns from superior trade ideas?

But if you've read enough ancient Greek drama, you will know that this is hubris and you're really asking for trouble. So you won't be surprised when we suggest that the superior way to generate and execute on trade ideas is to begin with something that pops up on a spreadsheet that you wouldn't have necessarily even considered. Something that isn't "yours." Something that isn't a reflection of your intellectual prowess, or even of your will.

In the last month, we've tried both of these things: (1) We've made trades because we thought they were good ideas, and (2) we've made trades because the Ideas page thought they were good ideas.

In category (2), from the last two weeks, are +HLNE, –LVHI, and [+XLF, –XLU, +XLK, –XLI]. Each of these trade ideas were taken from the Ideas page and our Dashboard. None of these ideas were something we'd have ever come up with on our own, or at least we wouldn't have come up with them now.

If we extend this lesson—and we probably should—the right thing to do this coming week is to just buy some small amount of SPX and shut up. Or go to the Ideas page and consider the virtues of Sandisk (ew, but whatever), Uranium (huh... maybe), or Rare Earths (seems pretty appropriate right now, actually).

In any case, remember that you're not missing out on anything by not placing a big trade today, and what you think would be a good trade probably isn't as good a trade as some stupid mid-cap stock that you've never heard of which is going to go up because of some dumb mechanical pattern.