Betting on a black swan event that could happen once every decade with a product that decays over time?
GAMBLING ON THE INEFFICIENCY OF THE OPTION FORMULA
- Thread starter Trading Education Buyer
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Devise your standard strategy in a way to take advantage of it , when it happens , meanwhile enjoy premiums atm.You can't time and predict trade entries for these situations.
ATM options for premium decay
https://www.elitetrader.com/et/threads/profitable-put-writing-strategy.305257/
My interpretation of Taleb's work is that Tail events are not properly valued nor can they be.
Many of the largest trading firms use the black scholes model as the foundation for their own model tweaks to address their perceived inefficiencies. I don't believe there are any liquidity providers that use the black Scholes itself only retail.
If you want to gamble on the market valuation models, then you're basically going long volatility because it's impossible to predict when the next liquidity event will happen.
My suggestion is to try to project the probability of success and extend your pay-off expectation to address the downside while you wait. Just remember that if you get it right and kill everyone else then that will change the valuation of the option market unless you trade against yourself. It should end up 50-50 and broker wins.
Many of the largest trading firms use the black scholes model as the foundation for their own model tweaks to address their perceived inefficiencies. I don't believe there are any liquidity providers that use the black Scholes itself only retail.
If you want to gamble on the market valuation models, then you're basically going long volatility because it's impossible to predict when the next liquidity event will happen.
My suggestion is to try to project the probability of success and extend your pay-off expectation to address the downside while you wait. Just remember that if you get it right and kill everyone else then that will change the valuation of the option market unless you trade against yourself. It should end up 50-50 and broker wins.
Yes , events unknown can not be priced :specially with stocks , indices are more predictable , but some like GERMAN 30 or smaller indexes are highly volatile , more volatile than U S indexes.
LOL, indeed...
Why? I don't understand.
I am trying to figure out , he was sounding intelligent on T2W zoo
Tell us why it is funny!
Self Sabotage for traders
Self Sabotage for traders
What do you not understand, ic? You don't understand why I find the OP's stream of consciousness posts amusing?
Are you familiar with volatility skew? You may want to read up on it a bit, as no intelligent discussion on this topic can take place without substantial discussion of skew and I've yet to see it so much as mentioned here.
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