New invention for the derivatives market - How to profit of it?

[VolSkewTrader]

@thecoder Your puts are nothing new. They trade already in crude oil and interest rate options on futures. You're copywriting something that already exists and is used in practice by thousands of traders.

What you clearly don't understand is those products are inherently different than stocks and equity indexes. Crude oil and interest rate products have theoretically unlimited upside and downside risk, which allows the puts to have equal payout as the calls. Stocks have limited downside risk, and therefore the puts can't payout the same as the calls. You have no clue on how to apply the appropriate calculations of probability, variance, volatlity, z-scores, and standard deviation. They are product specific.

 

[thecoder]

@VolSkewTrader, blah blah blah. Same sh*t you already had posted here.
Your objection has been registered. Thx and bye!

 

[thecoder]

It could be that in the posted program outputs the information on the zones (LZ, POZ, PZ)
for the Short FairPUT maybe need to be updated/fixed. Working on it...

 

[Overnight]

This is all starting to read like a different version of the Fleischmann-Pons debacle of 30 years ago, on table-top cold fusion. Anyone here remember that?

https://cen.acs.org/articles/94/i44/Cold-fusion-died-25-years.html

 

[VolSkewTrader]

"Long FairPUT:
LZ(const): Sx >= K(100.000000;z=0.000000) POZ(var): Sx < K(100.000000;z=0.000000) PZ(var): Sx < K-P(88.076462;z=-0.423216)
LZ_MaxLoss=P(11.923538) PZ_MaxProfit=Sup-K-P(ie. unlimited)
Credit=-11.923538 Payout=0.000000 Profit=-11.923538(-100.00%) (z=0.743812 zUp=0.743812 Sup=125.000000(25.00%)) Smid=100.000000(0.00) Sdown=80.000000(-20.00%)

Short FairPUT (same as Short PUT):
LZ(var): Sx <= K-P(88.076462;z=-0.423216) POZ(var): Sx > K-P(88.076462;z=-0.423216) PZ(const): Sx >= K(100.000000;z=0.000000)
LZ_MaxLoss=K-P(88.076462;-738.677212%) PZ_MaxProfit=P(11.923538)
Credit=11.923538 Payout=0.000000 Profit=11.923538(100.00%)"

Hey pinhead|SFB. According to your new invention code, hows come my long "FairPUT" has unlimited MaxProfit, but my short "FairPUT" MaxLoss is capped out (limited losses)?

So that means my long $1 strike "FairPUT" can make $1 million (just like/mirror image of the $1 strike "regular" BSM Call)...while the seller of the $1 strike "FairPUT" can only lose $1 max, just like a "regular" BSM Put. Who covers the $999,999.00 difference in that transaction...the Fed? And where do I sign up to simultaneously buy and sell these things?

 

[themickey]

.....Hey pinhead|SFB. ..... where do I sign up to simultaneously buy and sell these things?

At

 

[thecoder]

According to your new invention code, hows come my long "FairPUT" has unlimited MaxProfit, but my short "FairPUT" MaxLoss is capped out (limited losses)?

I already had addressed this problem in my last posting before your above posting. It reads:

It could be that in the posted program outputs the information on the zones (LZ, POZ, PZ)
for the Short FairPUT maybe need to be updated/fixed. Working on it...

As said, working on it...
It's now of course already clear that Short FairPut cannot be the same like a normal Put,
so the labelling "same as Short PUT" is obviously incorrect.
Still working on this problem; it's unfortunately a complicated/hard-to-solve one, as it seems... :-(
But I think it's just an "info" problem.
So, let's be patient and wait what my further research brings on this...

 

[thecoder]

A quick update:

It must of course be as follows:

Short FairPUT:
LZ_MaxLoss=unlimited PZ_MaxProfit=P(11.923538)

Calculating the exact boundaries and amounts for LZ, POZ and PZ is a little bit complicated, but as said I'm working on it and I am confident I will find the right equations soon.
So, IMO there is no problem at all; it was just an "info"/"interpretation" problem, as was suspected in my prev posting.

 

[VolSkewTrader]

A quick update:

It must of course be as follows:

Short FairPUT:
LZ_MaxLoss=unlimited PZ_MaxProfit=P(11.923538)

Calculating the exact boundaries and amounts for LZ, POZ and PZ is a little bit complicated, but as said I'm working on it and I am confident I will find the right equations soon.
So, IMO there is no problem at all; it was just an "info"/"interpretation" problem, as was suspected in my prev posting.

So my Tesla $10 strike regular BSM Puts only have $10 MaxLoss, but your TSLA $10 strike "FairPuts" have unlimited MaxLoss. Like someone could lose a million dollars on a short 1 lot $10 strike "FairPut". The margin requirement difference between the 2 would be astronomical.

Conversely, your TSLA $10 strike "FairPuts" are mirror images of and have the same unlimited MaxProfit as the regular BSM TSLA $10 strike Calls.

The $10 strike TSLA BSM Calls are $2,040 ITM. As a mirror image with equal payout, your "invention" would allow for the $10 strike TSLA "FairPuts" to also be $2,040 ITM.

Makes perfect senses.....if you're a lunatic.

 

[thecoder]

So my Tesla $10 strike regular BSM Puts only have $10 MaxLoss, but your TSLA $10 strike "FairPuts" have unlimited MaxLoss. Like someone could lose a million dollars on a short 1 lot $10 strike "FairPut". The margin requirement difference between the 2 would be astronomical.

Conversely, your TSLA $10 strike "FairPuts" are mirror images of and have the same unlimited MaxProfit as the regular BSM TSLA $10 strike Calls.

The $10 strike TSLA BSM Calls are $2,040 ITM. As a mirror image with equal payout, your "invention" would allow for the $10 strike TSLA "FairPuts" to also be $2,040 ITM.

Makes perfect senses.....

That's a correct analysis, right, yes, you finally got it!

Seriously: yes, that's it, and I don't see any problems with it. Things are as they are, as long as they are correct, especially mathematically correct.