Getting paid Gauss to deliver Cauchy

W

W-M-A

You are selling Cauchy (there are others too of course, but he is the meanest MF'er) and getting paid Gauss, options selling is all about comprehending that and working out when it is favourable to take the trade/risk and when to refrain,...,

I want to know how many of you fine option traders (mainly option sellers) out there are considering this type of reasoning/relative valuing in your trading?

I will elaborate just a little bit more on it, maybe its very clear already, but what is considered is that people buying the options from you does this with the assumption that the price will move outside of what is measured by the Normal Distribution, and what you are doing as a seller, is telling them, OK! Pay me what it is priced in Normal Distribution that you as a buyer think it will not stay within, and I will pay you back this vast space within the limited time (expiry date) that exists and is measurable outside of the Normal Distribution.

I really don't want to get involved with the Psi function and derivation of the wave function and its collapse around certain measurements/observations (prices), which we are anyway doing in the core essence of things so, skip the BS and any other option pricing model. But if any of you feel compelled to bring it up and any other theoretical aspect of the pricing models, please try to keep it to the formalisation of the probabilistic portion of the model, as this is anyway the most interesting aspect.
 
destriero said:
I wish vol would disappear when I measure it. You think SPX vol reflects a normal distro?
More...

Mean: 0,03%
Standard Deviation: 1,09%
Median: 0,05%
Kurtosis: 25,29
Skewness: -1,05
Minimum: -22,90%
Maximum: 10,96%

Above based on 60 years daily data, so, do I think it is? ;) haha, to be explicit no!
 
W-M-A said:
Mean: 0,03%
Standard Deviation: 1,09%
Median: 0,05%
Kurtosis: 25,29
Skewness: -1,05
Minimum: -22,90%
Maximum: 10,96%

Above based on 60 years daily data, so, do I think it is? ;) haha, to be explicit no!
More...


I'll have to disagree as I cannot find 60Y data on SPX vol in 1961 and no down and out skew before 1987.
 
Checked the data again, its actually from Feb 1971, so roughly 50 years and not 60, but exactly what do you mean data on SPX vol? I have a feeling that you would get raging mad if it was pointed out to you that SPX is a derivative of the continuous Futures contract on the S&P 500, and there are data going back pre 1987 on that contract. But whilst we are at it, what is the relevance of the measurement of the volatility of the derivative? Would you mind elaborating on your reasoning?
 
W-M-A said:
Checked the data again, its actually from Feb 1971, so roughly 50 years and not 60, but exactly what do you mean data on SPX vol? I have a feeling that you would get raging mad if it was pointed out to you that SPX is a derivative of the continuous Futures contract on the S&P 500, and there are data going back pre 1987 on that contract. But whilst we are at it, what is the relevance of the measurement of the volatility of the derivative? Would you mind elaborating on your reasoning?
More...


I think that you're high.

I wrote that downside puts did not trade over ATM-vol prior to 1987 nor was there any listed vol prior to 1973. Good luck with your thread.
 
W-M-A said:
...I have a feeling that you would get raging mad if it was pointed out to you that SPX is a derivative of the continuous Futures contract on the S&P 500, and there are data going back pre 1987 on that contract...
More...

I took a double-take on this one...

"SPX is a derivative of the continuous Futures contract on the S&P 500,"

Wow. Just wow.
 
destriero said:
I think that you're high.

I wrote that downside puts did not trade over ATM-vol prior to 1987 nor was there any listed vol prior to 1973. Good luck with your thread.
More...

I was not sure, but now am convinced that you have not at all understood the original post, and I just got dragged in the mud wrestling with you :(...
 
You must log in or register to reply here.
Back
Top