New Options Math !
- Thread starter jamesbp
- Start date
Maybe it's just late, but... what are you seeing that I'm missing? If you consider IV as a proxy for stdev, this seems correct; 68% chance of remaining within 1SD, 95% for 2SD, 99% for 3SD, etc. Unless you're concerned about them not specifying that it's annualized, or want to talk about normal vs. lognormal/kurtosis/etc., this seems like a reasonable intro to the basic concept (and for most of the TT crowd, something they'll have to puzzle over for a while.)
I was kidding when I said 'revolutionary' ... the example for expected range they provide is based on implied Vol 20% for 1 year ... using their definition ... what is the 3 SD range for following params ?
Stock price 1000
Implied Volatility 100%
Time 1 year
Again, given that TT's "thing" is getting new traders onboard via a basic education, all of their concepts are going to be introductory - and will fail out at the edges. They're not exactly teaching an actual stats class, just trying to get people to feel like they have an idea of what they're doing. In practical terms, the above question would never come up (why would a just-hatched trader care about 3SD in the first place?), so the crude, linear interpolation here would be meaningless.
(Finger-in-the-wind pricing: if you want me to make a market in the above, best I can do for ya is 315x385 ATM. It's the weekend, and I'm feeling too lazy to reach for my BSM calculator.
)Again, given that TT's "thing" is getting new traders onboard via a basic education, all of their concepts are going to be introductory - and will fail out at the edges. They're not exactly teaching an actual stats class, just trying to get people to feel like they have an idea of what they're doing. In practical terms, the above question would never come up (why would a just-hatched trader care about 3SD in the first place?), so the crude, linear interpolation here would be meaningless.
(Finger-in-the-wind pricing: if you want me to make a market in the above, best I can do for ya is 315x385 ATM. It's the weekend, and I'm feeling too lazy to reach for my BSM calculator.
but it’s disingenuous education and it will cost people money. Fortunately there are disclaimers to protect them.
Tasty trade is like one of those guys on the Las Vegas strip passing out stop club passes. They are bringing more minnows into the feeding tank.
Zero disagreement here.
Although, if seen in proper context - like taking the offered drink voucher, sipping that while ogling the girls, and then going on with your business (damn, the clubs hate that...) - it can be useful as a way to get started. TT isn't particularly toxic - they're not going to find your dead body in a dirty alley come morning - but like anything else, you have to have a mind of your own and keep your wits about you. If you don't, the world can be a very rough place.
TastyTrade...
Any trader, or traders, or company, in the public eye doesn't trade. But, rather, they are in the business of entertainment, advertisement, recruitment and services.
When I was once younger, and dumb, I watched that morning trading talk show everyday on their site. Thinking I would make a million from staring at those two trading Gods babbling away everyday. The best thing I could have done...was not watch that.
More than 99% of influences that flashes across your eyes and life daily, are purely toxic and useless to your mind, development, enrichment, body, soul and advancement.
It's a kill or be killed world. And if you don't know who's doing the killing, you're the kill.
Any trader, or traders, or company, in the public eye doesn't trade. But, rather, they are in the business of entertainment, advertisement, recruitment and services.
When I was once younger, and dumb, I watched that morning trading talk show everyday on their site. Thinking I would make a million from staring at those two trading Gods babbling away everyday. The best thing I could have done...was not watch that.
More than 99% of influences that flashes across your eyes and life daily, are purely toxic and useless to your mind, development, enrichment, body, soul and advancement.
It's a kill or be killed world. And if you don't know who's doing the killing, you're the kill.
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Correction: If you are not the one who is doing the killing, you are the kill. You could still be the kill even when knowing who's doing the killing.
Assuming the lognormal property of stock prices with an expected return of 16% per annum:
35.44 < St < 14296.29 is the 3 standard deviation range.
100 < St < 5053 is the 1.96 standard deviation range (a 95% probability).
Similar outcome if you use formula provided by Natenberg
Spot x exponential(#SD x Vol% x Sqrt(Days/365))