In long term, over a large number of issues, the outcome will converge toward the probabilities (as much as the model you're using is correct). Obviously in short term, and on any specific issue, you could have any outcome. So you have to correctly forecast the outcome of your current options positions.
Also, the market prices in its current opinion, but this opinion continuously changes.
The useful conclusion of all these is that it's futile to try to uncover an option strategy that would give you a positive expectancy, a strategy that would allow you to universally reduce risk and / or increase reward so you could apply it mechanically with success.
Once you accept this conclusion you stop looking for an unreachable goal and you can concentrate on tangible targets.
Also, the market prices in its current opinion, but this opinion continuously changes.
The useful conclusion of all these is that it's futile to try to uncover an option strategy that would give you a positive expectancy, a strategy that would allow you to universally reduce risk and / or increase reward so you could apply it mechanically with success.
Once you accept this conclusion you stop looking for an unreachable goal and you can concentrate on tangible targets.
Quote from ludmil:
i think i had your opinion on another threat-(and that of riskarb and other experienced traders too)-that's i want to discuss it more in debth.statistics is an interesting science!in average every american eats meat with pasta-but some have a lot of meat,other only pasta)
if all the probalities are incorporated in prices you don't have to predict anything!i believe that theory is true often,but not always.after all the hype in the i-net buble don't tell me the market is always right!
high IV means that the market expects a big move!but acording to McMillan the market if often wrong!that's why he is advocating selling cautiously high vol.,and buying low one!
my question-do you agree?is he right or is this only theory wihout hold in real world?