Risk reward sucks for options

[ironchef]

LOL they know their math... basically he's saying the probability of making profits when buying is 20%, and the probability of making profits when selling is 80%.

(Yes NVDA)

My point is that buying options suck as the title suggests when you take into account the probability of making profits versus the risk.

Some of us love to gamble, we like the 20% probability because of positive expectancy.

https://highline.huffingtonpost.com/articles/en/lotto-winners/

 

[poopy]

Well I watched a video on multivariable calculus. I went in knowing nothing at all, and somehow now I know even less.

You don't need single variable for understanding Ito or SABR, let alone multivariate. He trades piker CFDs and is generally FOS.

 

[wxytrader]

Some of us love to gamble, we like the 20% probability because of positive expectancy.

https://highline.huffingtonpost.com/articles/en/lotto-winners/

Yes that would have paid off yesterday but as demonstrated, spreads and especially fly's perform better, where you can expect between a 1:1 to a 3:1 return on risk on average.

 

[poopy]

Flies are great. Traded OTM (all wings) they are long gamma and can be bot for a fraction of a vert, but they are bimodal to delta (and other Greeks).

 

[ironchef]

Yes that would have paid off yesterday but as demonstrated, spreads and especially fly's perform better, where you can expect between a 1:1 to a 3:1 return on risk on average.

But unlike single legs, I haven't made any $ on flies.

Too dumb, haven't found the secret source for flies.

 

[taowave]

When you say a fraction,are you talking a discount greater than 25%?
And the Vert and the fly are the same strikes(ignoring the long wing)?

Flies are great. Traded OTM (all wings) they are long gamma and can be bot for a fraction of a vert, but they are bimodal to delta (and other Greeks).

 

[poopy]

Assign fly value n. fly = n/1. Yeah, same strikes. Obv i am not talking DN or $-neutral. The modality (and some skew under mkt, trivial) is the reason.

 

[taowave]

My bad,when you said OTM,I was thinking 5% or more OTM..Appreciate it

 

[wxytrader]

But unlike single legs, I haven't made any $ on flies.

Too dumb, haven't found the secret source for flies.

Flies are all about @expiry whereas as single call options need to move in a timely manner.

By my rough calculations for long options:

• 68% of the time you will lose money depending on when you close the position because a 1SD move by expiry is at best a break even.
• 27% of the time you will make 1:1 return on risk if price moves 2SD.
• 5% of the time you will do better than 1:1 return on risk if price moves 3SD.

 

[MACD]

Wow, they invented digitals!

For Sure they did