|
PureBytes Links
Trading Reference Links
|
Dear Ray,
You pretty much have it as I see it. I just wanted to put some statistical
teeth into selection and I am "statistically" brain dead...did great in
school with the subject but can not piece it together right now.
Sincerely,
John
> Hi John,
>
> I'm a little confused here. When you say "If option prices [selling a
> put and a call] are one standard deviation
> from the current price" what do you mean? Are you referring to the
> option's strike price being one standard deviation from the current
> price of the underlying? If that is your assumption then you would just
> sell 1 far out of the money call at and 1 far out of the money put (a
> short Strangle). In this position losses are unlimited and maximum
> profit is limited to premiums received from the 2 sales. If your
> assumption is correct that "there is only a 0.3% chance the strike price
> will be hit" then you could take consistent small profits at the risk of
> an occasional big hit.
>
> With the QQQ's at 35 +or- what would be the strike price for 3 standard
> deviations? Knowing this you can calculate the max profit (the current
> sum of the option prices received) and the two break even pointes: Upper
> break even = Call strike + call premium + put premium lower break even
> = Put strike - (call premium + put premium).
>
> Good luck and good trading,
>
> Ray Raffurty
>
>
>
>
> -----Original Message-----
> From: jvc689@xxxxxxx [mailto:jvc689@xxxxxxx]
> Sent: Tuesday, November 04, 2003 9:05 PM
> To: Realtraders@xxxxxxxxxxxxxxx
> Cc: MedianLine@xxxxxxxxxxxxxxx
> Subject: [RT] Neutral Position Spreads
>
>
>
>
> I am throwing myself into this to see if there is a mechanical way to do
> determine the best strike prices to use to sell a Put and sell a Call
> against a current price.
>
> From statistical definitions, it can be stated that:
>
> 1. If option prices [selling a put and a call] are one standard
> deviation from the current price, then there is a 32% chance the strike
> price will be hit.
>
> 2. If option prices are two standard deviations from the current price,
> then there is only a 5% to 10% chance the strike price will be hit.
>
> 3. If option prices are three standard deviations from the current
> price, then there is only a 0.3% chance the strike price will be hit.
>
> I am rusty on my statistics...so any help in doing the calculations
> would be appreciated. Hopefully, one based on an example...let's say the
> closing price of ECZ03 or 1.1482.
>
> Sincerely,
>
> John
>
>
>
>
>
>
> Dear Dale,
>
> I know how you feel...but we are at an awkward spot. I will send you a
> chart. Today was a 0.5 or 50% retracement of the slide and we hit the
> warning line today. I printed the chart and we need a 0.618 or 61.8 %
> retracement past the warning line to hit 1.1521 approximately.
>
> Let's talk and make the decision in the AM.
>
> Greed is good but also can turn a breakeven into a loser.
>
> Sincerely,
>
> John
>
>> john
>>
>> i am feeling a little bit of greed coming on and i think we should
>> cancel the 109 option buy back and go fo a win ? the market has
>> dropped 400pts since ive been in and im down a couple hundred bucks i
>> think for what we have been through a small move up here turns a
>> profit
>>
>>
>>
>> dale
>
>
>
>
> Yahoo! Groups Sponsor
> ADVERTISEMENT
>
>
>
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxxxxxx
>
>
>
> Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
------------------------ Yahoo! Groups Sponsor ---------------------~-->
Rent DVDs Online - Over 14,500 titles.
No Late Fees & Free Shipping.
Try Netflix for FREE!
http://us.click.yahoo.com/xlw.sC/XP.FAA/3jkFAA/zMEolB/TM
---------------------------------------------------------------------~->
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|