A trading idea

[Quanto]

Encountered a fishy-looking behavior of Delta: gives for DTE=3y, S=100, K=10 and IV=10 a Delta of 1, for IV=50 a Delta < 1, and for IV=500 again a Delta of 1.
Isn't this illogical? Or is this caused by some internal floating-point rounding errors?
It seems Delta is "oscillating"...

 

[Quanto]

Finding IV for a DITM strike (here K=10) with Delta=0.999, using these other specs/params:

find_IV_for_Delta fCall=1 Delta=0.999 S=100.0000 K=10.00 DTE=1095.00 IVstart=100.00 IVend=1000.00 IVstep=1.00 rPct=0.00 qPct=0.00 :
fFound=1 cSteps=204 IV=303.00 DeltaX=0.999

 

[shMark]

This isn't about "people"; this is about you. Nor is it about some random degree of growth, or you'd stick your money into T-bills, collect a positive return, and be happy.

The question is, can you pick a stock that will beat the market with acceptable volatility, define exits at desired profit/max acceptable loss, and take the heat when it goes down - as it inevitably will at some point?

Also... why would you pay the (relatively large) spread on a DITM option instead of just buying the stock outright? Given the margin you typically get on any decent stock, the cost will be about the same, the spread will be minimal, and you'll be getting dividends - something a DITM call won't give you.

I don't use margin. To afraid of screwing up. I did not say I could pick market beating stocks. I said, you can pick stocks that will go up. It is actually very hard to beat the market over a long period of time for most investors.

 

[destriero]

The value of the call is priced to the forward + put premium (reversal). The difference between the call price as proxy and the shares is the put. Sure, the call is a cheaper outlay but there is no free lunch.

 

[shMark]

The value of the call is priced to the forward + put premium (reversal). The difference between the call price as proxy and the shares is the put. Sure, the call is a cheaper outlay but there is no free lunch.

Perhaps, the strategy should be used on SPY.

 

[BlueWaterSailor]

I don't use margin. To afraid of screwing up. I did not say I could pick market beating stocks. I said, you can pick stocks that will go up. It is actually very hard to beat the market over a long period of time for most investors.

So you want to trade based on generalities, fear and ignorance of standard tools, and no ability to pick stocks - but want to focus on option strategies.

Hint: changing the color of your screwdriver will not grant you the ability to design a nuclear power plant.

Incidentally - I'm not trying to be mean or insulting; I'm trying to tell you that your approach has nothing worthwhile in it. Not even a learning opportunity, since your basic premise is flawed. But it seems you're banging ahead regardless of what you're told, so... good luck at the slot machine, I guess.

 

[shMark]

So you want to trade based on generalities, fear and ignorance of standard tools, and no ability to pick stocks - but want to focus on option strategies.

Hint: changing the color of your screwdriver will not grant you the ability to design a nuclear power plant.

Incidentally - I'm not trying to be mean or insulting; I'm trying to tell you that your approach has nothing worthwhile in it. Not even a learning opportunity, since your basic premise is flawed. But it seems you're banging ahead regardless of what you're told, so... good luck at the slot machine, I guess.

I have an ability to pick stocks. I know technical analysis and fundamental analysis. Can I beat the market, maybe not, or if I can, by 1.5% per year. Unless you have a very concentrated portfolio of 8 stocks or so, which you spend an enormous amount of time studying, it is hard to beat the market by more than 1.5% per year. I have been picking stocks for 27 years, it is much harder than people realize to beat the market by more than a small amount. At one point, you could beat it by picking small value stocks, but that stopped working.

 

[shMark]

So you want to trade based on generalities, fear and ignorance of standard tools, and no ability to pick stocks - but want to focus on option strategies.

Hint: changing the color of your screwdriver will not grant you the ability to design a nuclear power plant.

Incidentally - I'm not trying to be mean or insulting; I'm trying to tell you that your approach has nothing worthwhile in it. Not even a learning opportunity, since your basic premise is flawed. But it seems you're banging ahead regardless of what you're told, so... good luck at the slot machine, I guess.

Anyway, I am risk adverse, so I will paper trade before committing real money to these strategies. I sold options before, and it took a lot of time, and then I made a terrible trade. One of those you sell a cash secured put, and it goes down 20% in an hour.

 

[SunTrader]

I have an ability to pick stocks. I know technical analysis and fundamental analysis. Can I beat the market, maybe not, or if I can, by 1.5% per year. Unless you have a very concentrated portfolio of 8 stocks or so, which you spend an enormous amount of time studying, it is hard to beat the market by more than 1.5% per year. I have been picking stocks for 27 years, it is much harder than people realize to beat the market by more than a small amount. At one point, you could beat it by picking small value stocks, but that stopped working.

If you can't beat the market and are risk-adverse then, paraphrasing (Bruce Lee's "be like water"), be like the market.

Buy an index, get good steady returns, while lowering your transactions costs considerably.

Leave a check with the receptionist on your way out.

 

[shMark]

If you can't beat the market and are risk-adverse then, paraphrasing (Bruce Lee's "be like water"), be like the market.

Buy an index, get good steady returns, while lowering your transactions costs considerably.

Leave a check with the receptionist on your way out.

How about DITM leaps on SPY then?