Examples demonstrating non-optimal & inefficient trade constructs

[Quanto]

Examples demonstrating non-optimal & inefficient trade constructs
Knowing about them will save/earn you much money

LongStrangle ITM vs OTM: same result, but ITM costs more than 4x more than OTM !
But result of both at expiration is the same!... , as can be read from their PnL charts :

ITM LongStrangle: https://optioncreator.com/stslfcd
S=10 DTE=90 IV=50 LC.K=9 LP.K=11 both ITM, CostBase=NetDebit is much higher (2.62)

OTM LongStrangle: https://optioncreator.com/stp18w4
S=10 DTE=90 IV=50 LC.K=11 LP.K=9 both OTM, CostBase=NetDebit is much less (0.62)

Conclusion:
The resulting PnL at expiration for both constructs is identical, but the OTM LongStrangle wins at least 4 times more $ than the ITM LongStrangle, and loses only max about 1/4 of ITM LongStrangle.
Best seen when PnL% is calculated for both using their CostBase and PnL for any Sx at expiration.
Q.E.D.

Anybody know of other such non-optimal / inefficient constructs? Just post it here.


Here are the screenshots of the above constructs:

ITM LongStrangle:

OTM LongStrangle:

 

[jamesbp]

Conclusion:
The resulting PnL at expiration for both constructs is identical,
but the OTM LongStrangle wins at least 4 times more than the ITM LongStrangle,
and loses only max about 1/4 of ITM LongStrangle.

#BullshitForBrains compares Regular/GUTS Stangle and claims Regular wins 4x more than GUTS

Can't work out whether ... Parody or Troll ?

 

[Quanto]

#BullshitForBrains compares Regular/GUTS Stangle and claims Regular wins 4x more than GUTS

Can't work out whether ... Parody or Troll ?

@jamesbp, do you have a problem with reality, the facts, and the evidence, maybe?
It's all proven. Do you see any error? I doubt. Otherwise just let us know.

 

[Robert Morse]

"The "bullshit asymmetry principle" is also known as Brandolini's Law. It states that the amount of energy required to refute bullshit is much greater than the amount of energy required to produce it."

It's all proven.

 

[jamesbp]

@jamesbp, do you have a problem with reality, the facts, and the evidence, maybe?
It's all proven. Do you see any error? I doubt. Otherwise just let us know.

2 basic issues:

#1 you assume IntRate = 0; Diff between Regular/Guts Strangle < Strike Width (Box) when IntRate >0

#2 Risk/Reward identical; Regular Strangle is Not 4x more than Guts

I know you are new to this game, but it's embarassing to see some of the stuff you post :-}}

 

[Quanto]

2 basic issues:

#1 you assume IntRate = 0; Diff between Regular/Guts Strangle < Strike Width (Box) when IntRate >0

#2 Risk/Reward identical; Regular Strangle is Not 4x more than Guts

I know you are new to this game, but it's embarassing to see some of the stuff you post :-}}

Oh, come on, man. You might be a senior and I maybe a junior, but I have to certify to you that you yourself demonstrate to us all that you lack the basic math skills for evaluating/comparing these two trade contructs.

Re #1: the ratio (ie of the end result) would be the same whether one uses 0% or say 5% for both, since it gets used/applied in both.

Re #2: you are wrong, and maths proves it

 

[jamesbp]

Oh, come on, man. You might be a senior and I maybe a junior, but I have to certify to you that you yourself demonstrate to us all that you lack the basic math skills for evaluating/comparing these two trade contructs.

Re #1: the ratio (ie of the end result) would be the same whether one uses 0% or say 5% for both, since it gets used/applied in both.

Re #2: you are wrong, and maths proves it

I guess neither Options or Maths your strong suit !

 

[jamesbp]

Oh, come on, man. You might be a senior and I maybe a junior, but I have to certify to you that you yourself demonstrate to us all that you lack the basic math skills for evaluating/comparing these two trade contructs.

Re #1: the ratio (ie of the end result) would be the same whether one uses 0% or say 5% for both, since it gets used/applied in both.

Re #2: you are wrong, and maths proves it

Feel free to show your workings for

#1 including IntRate say 5%
#2 Risk/Reward

 

[Quanto]

Feel free to show your workings for

#1 including IntRate say 5%
#2 Risk/Reward

I will do the calc if you first show us your own result.
So, come on old man, I challenge you! And I give you the chance to win a debate.
And I'm sure you will lose that battle...
Since it's basic maths, ie. a fact...
En garde, monsieur!

 

[jamesbp]

I will do the calc if you first show us your own result.
So, come on old man, I challenge you! And I give you the chance to win a debate.
And I'm sure you will lose that battle...
Since it's basic maths, ie. a fact...

Both of your examples; $9-$11 Strikes

RegularStrangle = Debit $0.62 premium
GutsStrangle = Debit $2.62 premium
PremiumDifference = StrikeWidth = Box = $2.00

Both have MaxRisk $0.62 between Strikes
Both have Identical PayOff Profiles
Both have identical Risk ($0.62) v Reward