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JJ90 as you may know there is very little material on BWBs and ratio spreading. This subject really doesn't belong here since it has nothing to do with what the newbie thought he was looking for. Don't know why daddy's boy popped up with it. The BWB strategy needs to have its own elitetrader...

There's quite a number of us over at Yahoo groups talking about how this strategy works. Search for broken wing butterfly or "BWB".

Yes, you can use them like a straddle, braketing the market, with less debit. I do a Yahoo BWB group with these. Most of mine are modeled on the SPY for liquidity reasons, but here is an SWB on the OEX that was done few weeks ago (July 11). OEX at 583.68. July puts. 1x580P...

"OTM Bets" is a good way to describe BWBs. You have to be either way OTM or way before expiration to get a small credit, and then what is the point? You wait and wait and wait and hope that the wheel of fortune lands on your strike, and the odds of that are very very small. If you do them...

Interesting you mention BWBs. I've been looking at them a lot lately. What is your commentary/opinion of them?

I have the big advanced second book on P&L. Done on a typewriter in the days before computers ..... and backtesting.

His reply would be that he only needs to win once. What Taleb claims is that when he was holding 20 sigma OTM options he could sustain 67,000 months of time decay. "And you don't need to be right on the event, because you can bleed for 67,000 months and still be ahead." Incredible claim, and...

Preston, congratulations on sounding like a real person. I think it was the original wording of your post that suggested you might be just another ignorant rich guy pompously throwing big money around. Mention of specific $$$ was really not necessary. You must realize that many here may not...

There is also a difference between expected and realized return. When looking back at past performance one is looking at realized return, hence realized beta and alpha. Looking toward the future is the expected return. However, beta is fluctuating all the time, so regardless of what the beta...

Talib's claim to fame was that he actually had a bunch of these options during the '87 crash, and he continues to go for a repeat. He talks about it in his current interview. These far OTM options are not available in most markets such as stocks, etc. He had them on Eurodollars -- one of the...

So let's say we have 4 years of data (1000 days). The max length of the VR period would be 33 days? That's a long way from the length of the series. And the minimum length? Why only 10 samples? Is that 1000 random walk length / 100? I'm not sure what the 100:1 ratio means. Does it mean...

Stephen, so how many days of daily data do you recommend? If we have 2 years of data, can we do a VR on a 1 month base period, compare that to 6 months, then roll this forward to get a graph of the VR through the whole 2 years. Or how would you go about it?

Would it be possible for those of us with Excel to do this test? I believe the VR is also called an F-test. Would you suggest a stock so that we could post the results and compare with yours?

Stephan, You seem to be running a very complex and sophisticated operation, taking quotes out of the market depth book into a computational engine, which most of us would not be capable of doing without a great deal of programming assistance. I'm wondering whether something more simple could...

GTG, I don't understand why "trading time" would not be "real-time"? To your point about using tick data, I agree with you that you could take a certain number of ticks as your base period, if not 10 then perhaps 500 or somewhere in between, sort of like tick charts instead of minute bars, but...

At what point in the day can you actually trade using this? Obviously there is a minimum amount of data required to calculate a variance ratio which can be used for a decision matrix. If you are using 5 minute bars how many hours do you need to have enough data to trade from? Or do you do 1...

I haven't read the book, obviously, but from what I know of the guy he seems quirky. 1.67 seems like an arbitary number, perhaps the average of all stocks. We all know that stocks differ greatly, each having a personality. You can take two, for example, that have the same HV, with one having...

Example using rolling 30 day correlation. Pairtrader.com has been informed of the gross errors in their correlation calcs.

gbos, Thanks for a very complete explanation of Parkinson's volatility. I just cannot help ask where the following information comes from: Not doubting that you have a source for this, but it seems inconceivable that in 1980 he could have used any data other than stocks. The only data that...

And to follow up, the 252/20 or 252/5 are common ratios in all volatility formulas to calculate the volatility of periods less than a year, but the volatility formulas always use the square root of the days in the ratio. For example, the volatility of a 25 day period would be sq rt 25 divided...