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I got slightly different DOW calcs than GBOS; All data (1900-2001) Vol 17.2% Skew -1.1 Kurt 36.3 1990's Vol 14.6% Skew -0.40 Kurt 5.2 1980's Vol 18.4% Skew -4.35 Kurt 100.4

Huge market, much more liquidity, but I'm doing just fine in the UK markets and see no reason to change. Not sure what the deal is at IB, but I'm sure someone will answer your Q's.

[/b]Yes, stock will drop by the div amount, and calls value drop too. So, if you’re long a call option and don’t want to lose value you can a) sell the option day before ex or b) exercise it and capture the dividend. It would be very good if the option holder did nothing !!! [/b]Yes, but...

GBOS Thanks for that data. Any chance you could post it up in Excel format ?

[/b]Two reasons. First, currency risk. Second, I’m doing quite well trading the UK markets, so have no reason to look elsewhere. If it ain’t broke I’m not one to fix it. [/b]Almost exclusively selling naked premium. I know the risks involved, but do believe that if you limit exposure such...

Surely not !!!

MTE... [/b]Well, yes, vaguely, at least historically. But we are talking – Black Swan – so unlikely an event that it’s hardly within our comprehension and therefore shouldn’t be considered to favour any particular direction. However fat tails, at least fatter than a “normal”...

Hi gbos Good to hear from you - it's been a while ! Hope all is well (?). Yes, that would be a good example of an index having fatter tails than the component stocks, even though the index vol is less than the component stocks vol. Volatility and Kurtosis are two completely different...

Wayne There is a function in Excel that measures Kurtosis (KURT). It measures the Fischer kurtosis whereby in a "normal" distribution Kurtosis measures 0. Checking (historical) Kurtosis is a peice of p!ss. MTE Back swan risk isn't directional. Bin Laden captured, Christ appearing, Bush...

Wayne I actually meant metaphorically, rather than literally, but thanx for the pic. Quoting the odd stock (ELN) that got hit by the black swan phenomena, does not mean that stocks inherently have fatter tails than indices. As I've said, you'd have to study your particular market, but...

I've never seen a black swan - do they exist ? I suppose you'd have to look at the market(s) you trade to see if there are fatter tails in the index or the component stocks. I guess every market is different. Certainly in my market (UK indicies and stocks) there is more Kurtosis in the...

Tyrant Both. I have a “core” of half a dozen stocks which I’ve come to know, and trade very regularly. But I’m also constantly looking for opportunities in other stocks and will trade anything if the price / IV is right. Optionspoet [/b] Possibly. But that doesn’t make an index...

No idea. It's my main strategy, has been for years.

DB Yes. IF the distribution is normal, and IF you input the correct future vol, then 1 x SD will account for 68% of all prices. So sell a 34 delta Put and a 34 delta call, and you will keep all the premium 68% of the time. Strictly speaking the Delta (or ND1) is the hedge ratio in...

You are correct. BUT, before you can calculate a Delta / Probability / SD, you need a volatility input - that is the future volatility, which cannot be known in advance. I think that is what Maverick is alluding to, if not, I haven't a clue what he's on about.

Mav I can agree with that. So are you saying that because the future volatility cannot be know in advance any edge is perceived, rather than real ?

Quite possibly. That would explain us being so diametrically opposed.

Mav The hedge ratio (delta- Nd1) and the true probability ("to be called" - Nd2) are so close it's like splitting hairs.

Rally [/b]An edge and an arb are two completely different things. One is a certainty, the other isn't. Rather like comparing chalk and cheese. If Mav is talking arb then I’d agree with him completely. But he isn’t. Profitable conversions and reversals are arbs, they are not an edge. [/b]I...

Mav I’m not a newbie and I’d like to think I have plenty of introspective thought. No ego here sir, always willing to learn. I still can’t get my head around your thinking. Persevere, please.... I know you are trading Delta’s. Let me try another angle.... As you say, delta is a...