Probability of a stock to follow a specific pathway

[MrAgi1]

Your 10x figure is fantasy. You're stating that structured as a delimited payoff (0-100) you're buying this for 10? C'mon man.

Equity exotics are a small fraction of what's traded as TRS. As an intellectual exercise it's cool, but it's not practical. The edge loss would make the independent structures look cheap. You've got a better chance of starting forward for the Knicks then getting this traded.

@destriero
Yes of course no chance of this getting traded. Let's say an intellectual exercise for now.

 

[taowave]

Seems almost guaranteed of geting knocked out for a 9.99 percent max return

@taowave
It should be mathematically because the probability of such an event occurring is quite small. And small probability means cheap premiums paid. However, there are other problems such as liquidity which increases cost. I guess you already know about all this.

 

[destriero]

Well not really. On binary.com for instance, select US index for instance. The current price is about 4745. Go look at the option chain of the E-mini. The price of the ATM call or put for the next 9 days duration is about 25.

Now add 25 and subtract 25 from 4745 this would give you a range of 4720 to 4770. Now on binary.com select US index and stay between and use the barrier 4720 to 4770, watch out for the estimated profit. It is 900%, that is a reward to risk ratio of 10:1. Is it not?

Alright. I assumed that I was dealing with a sane, coherent individual. Apples grow from trees; oranges grow from trees; apples = oranges.

 

[Tradex]

With computational power cheap and fast, brute force looks fine to me,

Same here, I use Monte-Carlo simulations all the time, but mainly to estimate the risk of ruin of various trading systems, mine included.
Thanks for your input James.

 

[newwurldmn]

Same here, I use Monte-Carlo simulations all the time, but mainly to estimate the risk of ruin of various trading systems, mine included.
Thanks for your input James.

I think you would really benefit from reading some
Finance fx books.

I mean this genuinely.

the snide remark about the triangular arbitrage should have resonated with you about a flaw of your trading strategy which could be causing you to lose money or lower your earning potential.

 

[MrAgi1]

Seems almost guaranteed of geting knocked out for a 9.99 percent max return

@taowave
Yes, It is sort of a hedge trade if certain rare conditions occur, not the main trade. It is just theory, I was just thinking of complex new ideas and how they could be traded. Nothing serious.

You mean a 9.99 percent max return?

 

[newwurldmn]

@taowave
Yes, It is sort of a hedge trade if certain rare conditions occur, not the main trade. It is just theory, I was just thinking of complex new ideas and how they could be traded. Nothing serious.

You mean a 9.99 percent max return?

you can’t even trade this structure can you?

 

[Tradex]

I think you would really benefit from reading some
Finance fx books.

Listen sonny boy, I have read over 400 trading books during the last 20 years, and I continue to read new ones every month (not to mention my subscriptions to trading magazines and newspapers such as Stocks and Commodities, Futures, Investor's business daily, Barron's, etc...), so enough with the condescending attitude, alright?

 

[MrAgi1]

you can’t even trade this structure can you?

I don't think it is out there to be traded, but you never know. I just made it up to get an estimate of the probability of something that complex happening.

 

[destriero]

I think you would really benefit from reading some
Finance fx books.

I mean this genuinely.

the snide remark about the triangular arbitrage should have resonated with you about a flaw of your trading strategy which could be causing you to lose money or lower your earning potential.

He never figured out that he had zero exposure to the original pair.