Buying options...

[mizhael]

Quote from riskfreetrading:

Is your background in Operations Research, Mathematical Finance?

Yes, that's my background.

One holds the same view towards the underlying stock, and one has a bunch of choices. What does one do then? One would define an objective function and optimize over it. So what's the objective function here in buying options?

 

[riskfreetrading]

Quote from mizhael:

Yes, that's my background.

One holds the same view towards the underlying stock, and one has a bunch of choices. What does one do then? One would define an objective function and optimize over it. So what's the objective function here in buying options?

You are in a possibly good direction. Think the stochastic knapsack problem. You need time to internalize the problems, and also understand the maths of the problems (analysis). You should also understand that pricing is based on the principle of zero sum game. Assuming you can find holes in there, you can siphon money to your account (via drips or little streams, with movement of stock helping you to move from one hole to another to drink the richy liquid from the pockets of others).