Some obvious facts...

Quote from mutluit:

Yeah, if arguments are out then get personal... I filed a complaint to the admin.
The troll is yourself, as you have nothing constructive to contribute to the discussion.
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I don't want to be reported to the adm, like newwurldmn was, so I have decided to agree with mutluit.
His analysis and conclusions are brilliant and logical.
They demonstate an understanding of the options market, that is far superior to what others here can ever hope to comprehend.
I strongly suggest other trolls here reconsider their ridiculous arguments against mutluit's comments, before they too are reported to the adm.
The adm has a history of responses to complaints like his, that are swift, unforgiving and severe.
Admit the truth of the brilliance of which he speaks, or suffer the consequences!
 
Hey Put_Master, you don't need that sarcastic theater to disagree with me.
I respect everybody's view, but personal insulting in such public forums is inacceptable.
 
Quote from Newex:

Bit confused from what everyone is saying but my understanding is that in a volatile market the price of an out of the money option is higher that of the same option in a less volatile market .

(in a volatile market the otm options has more chances to bocome in the money )

So i guess i totally disagree with the topic starter
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umm.. your right.. but this isn't a good thread to follow..... thats an obvious fact...
when your backtesting.. your looking to see how the implied volatility of say straddles played out real time in the market.. meaning i bought implied volatility.. the question is was the implied cheap or expensive relative to what volatility the market realized..

talking in generalities about so called "low implied vol" stocks against "high implied" stocks is a huge generalization.. there are so many low implieds and so many high implied... making large assumptions like that only makes for bad assumptions in discretionary trading..
there was a saying i heard once that followed this theme.. if vol is low buy, if vol is high sell, if vol is really high buy..
while in some cases this might be true there are just as many cases where its not.. it just as stupid as saying.. selling options is a better strategy then buying options.. NOT TRUE..
 
Quote from mutluit:

Sure it must be the same time in such a comparison, otherwise such a comparison wouldn't make any sense.
The table says: if at time t the price of the underlying moved x% since opening the position then the payoff (ie. the change in premium) is that %.
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OK so you calculate your payoff% by comparing to the option price at time t=0, which is not shown here(?) Maybe you need to give more detail of your calcs.

Your results should be correct but I can't see how they can point to a trading strategy
 
Quote from kapw7:
OK so you calculate your payoff% by comparing to the option price at time t=0, which is not shown here(?) Maybe you need to give more detail of your calcs.

Your results should be correct but I can't see how they can point to a trading strategy
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No problem, I can post a much detailed table.
Just tell me which params you would like to see used:

base = 100
strike = ?
tExpireDays = ?
tHoldDays = ?
low vola: starting vola = ?
low vola: ending vola = ?
high vola: starting vola = ?
high vola: ending vola = ?

Regarding a trading strategy: I have one based on these findings, but it's not suited to discuss here, maybe in an other thread in the future.
First let us clear the current questions.
 
I think I'm getting now how you do the calculations but I had the sense that maybe it was confusing for other posters.

I would give more thought to what sle pointed and also about using market option prices for testing trading ideas.
 
Quote from mutluit:

Hey Put_Master, you don't need that sarcastic theater to disagree with me.
I respect everybody's view, but personal insulting in such public forums is inacceptable.
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I find your discription of my post as "sarcastic",... to be personally insulting and unacceptable.
 
Quote from kapw7:

I think I'm getting now how you do the calculations but I had the sense that maybe it was confusing for other posters.

I would give more thought to what sle pointed and also about using market option prices for testing trading ideas.
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Studies should be done against a pricing model.
The other method is called backtesting.
I'm doing the study, not backtesting, as I believe a study gives more realistic answers than a backtesting with dubious options quotes, as they usually are.
 
Some obvious facts [UPDATE-1]:

- The payoff (premium) of a higher volatile options is lesser than that of a lower volatile options.

- An increasing of Implied Volatility (IV) is very valuable (for both Calls and Puts), so buy at low volatility.

- Downside is limited, but Upside is unlimited... :)
(hint: a stock cannot fall below 0... :p

- The trade isn't a winner or a loser until the entire position is closed.
In the mean time strategic position management together with strategic money management should be (has to be) applied, if necessary.

- Don't forget Theta, aka the time decay...

- Trade for the intrinsic value, not for the time value :D

- If possible use warrants over options as the commision for warrants is much cheaper ($4 vs. $50 for example).
If not possible in your country then use for example a German broker, as warrants seem to be traded mostly at German exchanges, incl. US warrants. Practically Warrants = Options. Warrants are issued by the underlying company itself to raise additional capital. Options are issued by the exchange, and as such don't bring the company any additional capital --> so, trade warrants, not options...


...add yours...
 
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