Yes, that is something that can be calculated.
best length for selling a weekly option?
- Thread starter shMark
- Start date
Yes, that is something that can be calculated.
Not really, it was mostly luck.
Don't confuse my skills with a bull market.
2009 to 2024 has been one of the longest and best bull markets in history. Anyone who bet long with leverage would make a killing.
Most likely won't happen again after this presidential election and I will have to try something else, perhaps day trading stocks?
Just prove it, if you can...
Is time t (ie. DTE) not needed?
IMO w/o t it's not possible. Or is there maybe a math trick to solve it w/o t ? I doubt.
And what about r and q? Ie. the interest rate and dividend rate?
Facts please, no BS talk anymore!
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p > 1 is impossible
I guess you rather mean "prob. of expiring ITM > 0.5" (actually meaning "prob. of expiring OTM > 0.5", ie. the rest probability).
And yes, your #2 as a goal makes very well sense
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For those looking for a formula:
IMO, the easiest method is using the "d1" (also known as "d+"; I call it "p1") of the Black-Scholes formula.
It's our famous Greek friend named "Delta"!
But then the above statement of 2rosy becomes dubious to understand, b/c Delta already gets understood by many as the p for expiring ITM. Maybe 2rosy can clarify what he means.
I think 2rosy just means "Look for where abs(Delta) is > 0.5", ie. take those options with abs(Delta) > 0.5. Ie. collect Premiums from options with abs(Delta) > 0.5; the higher Delta the better, b/c for it becoming ITM is the rest probability, ie. pITM = 1 - abs(Delta).
abs(x) is the absolute function, ie. makes a negative number positive.
B/c for Put options Delta is negative (range 0.0 to -1.0). For Call options Delta is 0.0 to +1.0.
Since an options seller does not want the option become ITM, then a small pITM as possible is desirable for the seller, meaning to sell Call options with high Delta towards 1.0 (or towards -1.0 for Put options), if found any. Those options usually have a higher IV than normal...
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Also deep ITM strikes (DITM) and DOTM strikes have usually a much higher IV than the ATM strike, due to the effects of volatility smile.
They usually have also a higher abs(Delta) since they are much far away from ATM (ie. the current stock price).
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Correction of the last statement above:Also deep ITM strikes (DITM) and DOTM strikes have usually a much higher IV than the ATM strike, due to the effects of volatility smile.
They usually have also a higher abs(Delta) since they are much far away from ATM (ie. the current stock price).
DITM strikes usually have also a higher abs(Delta) (ie. > 0.5) since they are much far away from ATM (ie. the current stock price).
Remember: due to Put/Call parity, it follows that Call.Delta + Put.Delta = 1.0 .
Ie. DOTM strikes have a low abs(Delta), ie. less than 0.5.
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p > 1 is impossible
I guess you rather mean "prob. of expiring ITM > 0.5" (actually meaning "prob. of expiring OTM > 0.5", ie. the rest probability).
And yes, your #2 as a goal makes very well sense
It's a ratio. annualized gain/probably expiring ITM > 1