Search results

I don't think that market makers continuously adjust for everything all the time... Probably intraday they adjust almost instantly to spot movements, quite regularly to volatility changes, and maybe just once in a while to time decay. Disclaimer: This comes from my observation of option price...

Nevermind...

My constructive advice: The table you made could be a reference that you use in conjunction with a ruleset, in order to determine when to entry, when to hold and when to sell. However it's far from being a viable system by itself. You need to define： what is your universe in terms of tradable...

sticking to the art analogy.. painting that Henry VIII would be the equivalent of being a pro/hedge fund/market maker. Unattainable level of skill & resources. That Barnett instead.. that's more akin to a small retail trader who found an interesting arb or niche strategy.. It's interesting to...

if you enter an order at mid but the spread is still wide, many times there will be algos trying to get in front of you to catch those few real market orders. If the underlying doesn't go your way (I.E. against you), you could be left waiting for a long time.

I'm wondering if we are being trolled :wtf:

ITM most of the time trades worse than OTM.. lower volume wider spreads

consider that during the life of the option DTE will change and IV will change, and both factors will affect option price. Long dated options are more sensitive to IV, so PnL swings due to IV changes have bigger impact than changes in spot. Very different from holding the underlying. Of...

short call + long put, same strike = synthetic short long call + long put, same strike = long straddle, totally different animal a very deep ITM put with relatively close expiry can approximate the behavior of short stock, but only locally. The longer the DTE, the greater the volatility...

@taowave may I ask what's your experience with ARCH/GARCH models? I occasionally check some online models (https://vlab.stern.nyu.edu/volatility) but I can't shake that feeling that it's not much better than a monkey throwing darts at a board..

Pas de problem :)

my suggestion was actually more akin to a thought experiment In case of doubts, one could simply take the function as a black box process (hence the need to have it from a reputable source), plug in a few positive and negative numbers, and confirm the correct application of the formula by...

OP are you planning to be long puts in what time frame? Did you consider being short calls? what is in your opinion the worst case scenario in terms of stock movement? You will get conflicting answers if you dont make these elements clear

lol umbelievable this thread went on for so long.. why dont you simply download some pre-made libraries with math functions from a reputable source, input the numbers and see what comes out?

come back to this journal to tell us how it goes ;)

Hello there, I kind of feel your pain, been there myself. In the past, I tried trading for a living, but I was dramatically undercapitalized and my goal was too ambitious. This in turn generated huge amounts of stress, and despite having developed a good system and a good plan before leaving my...

when you say "explore via simulation" do you mean something like a montecarlo simulation?

https://www.investopedia.com/options-basics-tutorial-4583012

I know shit about high level math so take my comment as an uneducated guess.. however I think that neither lognormal nor normal are an accurate representation of what you see in reality. And my guess on the "why" is that while textbooks are based on BSM, market makers use different models to...

My comment was about OP's graph, not yours :)