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I forgot to answer the question. A covered call is equivalent to a naked short put and it is a very conservative strategy in equities. In general being short gamma without any protection ("naked", undhedged) is not a very good idea for most (they are those brave out there, but there is always...

There are many ways to make (and lose) money with options. They range from very conservative (like covered calls), to outright crazy (naked calls in equities, naked puts in index). I prefer the ones in between. The fact you are asking the question means that you are just starting down this road...

I see, but how do you compute that lognormal distribitution? In other words, what mean and standard deviation do you use for it ? I ask this because of course we don't know that the distribution will be in the future (if we knew, we could be immensely rich by now), so I'm curious on how...

I'm glad you played with it, One piece of information that the optimizer provides is the Risk Reward factor (you can select it from the type of plot). That will tell you what is the best trade for the risk you are willing to take. In general if you think that the expected move will occur pretty...

From all your posts I have always wondered where do you get the Probability from? It is a honest curiosity, is it from the moneyness of the 140 Call ?

When playing long gamma (long options) we want to have maximum optionality (that is we want to pick options with high gamma values) for the period of time of the move we are considering. Unfortunately gamma becomes smaller and smaller the farther we go in expiration time. So as we pick options...

Day trading price with linear instruments (shares, futures, CFD's) is an attrition game. I'm surprised by how little statistical analysis is done about this. In an efficient market (like the US equities market) the maximum you can achieve with any price systems is 50% success. Of course this...

The question that everyone asks all the time is what is the best strike and expiration to play a given move. At least that is the question that everyone ask me all the time, so I decided to write a simple long gamma optimizer that would pick the best option based on the thesis being tested, of...

It does make a huge difference in particular as you move farther away in expirations. Also for the sake of accuracy use the following website for the risk free rate for SPX: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield Also please...

I forgot to add here that a common methodology to solve this issue is to compute the underlying price at 4:15PM by using something like the CBOE does for VIX, just use the put call parity to your advantage: 1. compute the absolute value of the difference between put prices and call prices...

Stepan, one thing you need to take into account is to remember something very simple but that still trips everyone looking at end of day option prices: 1. SPX ceases updating values for the day at 4:00PM 2. SPX options trade until 4:15PM. So there are 15 minutes where the option will trade but...

There are plenty of research papers that try to extract information from volume (from calls and puts) with diverse results. In index options there is a certain degree of information in that volume but you need to segregate the volume information in different buckets (like retail, institutional...

Just a comment about dividends. Because SPX options use the basket of SP500 stocks as its reference underlying, then it would be possible to do dividend arbitrage if the SPX options didn't incorporate it in their pricing. So yes, when pricing SPX options please include continuous paying...

I think you sidestepped the question rajesheck. I'm asking if the strategy can be automated in general (no referring to any particular tool). As a general rule of thumb if any of the steps in the strategy involves "intuition" or "gut feeling" then it can't be automated, however if the only thing...

It is systematic rajesheck in the sense it can be readily automated. Any insights/research are all gone once you turn the switch on for the algorithm. Unless I'm missing something, can this strategy be fully automated or not?

Just do basic back testing and/or simulation, and I'm pretty sure that in a sufficient long period this thing will give you 50% success rate like any all of the other systematic approaches out there. There is no edge in price prediction, it is a sad but true reality of efficient markets

I hear you Tibster, but believe me, the money in long gamma (long options) is only present at the short term interval trades. Doing long gamma trades that last for months is basically a fool's game. You are giving away all your edge and allowing the variance risk premium to accumulate. I have...

Good one, But I'm being serious, back in the day (decades ago) I wrote a market simulator using GBM and prevalent realized volatility values to simulate 1 minute intraday moves. Then I applied my complex algorithm (coin toss) with a few more parameters (like closing and stop criteria) and I...

In an efficient market (like the US equities one) the best that any systematic strategy hopes to achieve is 50% success rate. I can suggest a simpler one that can compete with any other strategy out in the open: -Flip a coin - heads, go long - tails, go short

Man, almost two years and the VA product is still without volume. So sad, I badly wanted to build a whole trading empire around it :)