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Stephen, In your opinion if the variance test has proven itself as a good indicator of trendiness (and thus of non-random behavior in the markets), why are the proponents of randomness still around? And why are all the pricing models still using assumptions of randomness? And how does this...

malaka, Why are you using an array formula, or are you just talking loosely about a series of prices? Correl does not use an array formula in a cell. It uses a range of price change logs. Did you try to duplicate my results? You don't seem to be using logs as I did? Stephen, I'm just...

It is a correlation graph. The last date (point) on the graph (.09) is the correlation between the logs of the stock price changes between February 14 and December 14 '05. The prior point on the graph is the correlation between February 13 and December 13 '05. . . . and so it goes. This is...

I wanted to check the DNA-MRK correlation so used the recent 2 months (Dec 14 - Feb 14) or 40 data points. I think using a whole year or two has meaning for some but I use faster time frames like 30 to 60 days. I want to see how it has fluctuated. I get different results than what is posted...

How nice. 4.8% of WHAT? Please define "free" calls What is "corr" an abbreviation for?

Correction: rather than a ratio write, the position simply replicates to net short slightly OTM index puts. It would be interesting to see a P&L graph of the position at different strikes.

I am also not sure what the spreadsheet is intended to prove. I think the weights of the Dow stocks are an issue, since the heaviest 8 or so stocks have twice the weight of the lightest 8 or so. Another problem is the lack of delta weights with the options. By selling 30 options for each...

Shows that anybody can come in here and post anything and call people names, but oops . . . I forgot this is the self-proclaimed "king" of the board who has contributed very little except for cryptic one-liners. Why don't you write something of value, oh great one -- you who know so much...

Steve, Your not missing much except 70 DJX puts (or 7 DXL) is not really small size. If there was decent liquidity in the jumbos there would be no question what to use, but there is not so he will be having a personal relationship with the MM. Do you think that those guys might look at who is...

Yeah, I do, and you should thank me for doing your homework for you and serving it up for you to read. Isn't reading it a lot better than reading those one-liners written in code and jargon? But instead of reading it and learning he impulsively puts it on ignore and then does not know how to...

Yes there is an arb with the DIA and primarily with the DJX, since DXL is nothing but a jumbo DJX. And the arb is done by the floor when people like our friend put a DXL order in. The DXL has been trading only 2 months and his 1080 put did 0 volume today and has a whopping 7 contract open...

ludmil, To begin to understand dispersion trading you need to be at an advanced level with years of option study. There are no public track records or usual educational sources of information except for high level academic papers. If you have read this thread, which I guess you have not...

I don't know why you think the comments are negative. They are constructive questions. You have not answered many questions, and one question has been asked 6 times. Why do you post if you do not want a dialog with others? There are only a handful of people here who can help you with this...

So where is your 1x2 ratio? You'd better learn your deltas. They might help you to keep control of a monstrosity like this if it starts to run. Still no answer about why you choose to be so capital intensive. Money to burn? I have attached a picture of what it would look like to weight...

The same way you do it with any other program. You right click on a program window and click copy, then right click on the post window here and click paste.

So let's see if we got the details right on this position, looking at the deltas: Long 100 shares stock (for each component stock) Short OTM put (equivalent to ITM CC) 100 - (35 or 40) = 60 or 65 deltas for each stock. Hedge by buying DIA ATM puts for about 1.25 each. -50 deltas each...

Glad you cleared that up because all of us assumed just the opposite. Despite repeated requests, you still have not yet explained why you insist on buying the stocks with covered calls rather than just selling the puts? And I'm sure you know that a simple ratio of weighted basket IV to index...

So you are telling us that EGAR (part of ivolatilitly) shows MO correlation at 17%, while ivolatility shows it at 3.92%?

IV_Trader, when you say that Egar shows MO correlation at 17%, what exactly are you referring to as your source for that? Are you an EGAR subscriber? You have also been doing full replication on the Dow, so why the change? Because of its price weighting, the Dow is not particularly suited...

Again you don't tell us what dispersion strategy you are referring to so I'll have to guess and say it looks like -dispersion where you are selling the components, but I really can't be sure since there are different philosophies about using correlation to forecast. The IV/SV ratio of the 2...