What is the most statistically predictable Option strategy?

[newwurldmn]

What is the most statistically predictable Option strategy?


They all are predictable. Anyone with a basic understanding of options should be able to predict a rough value of the position depending on the value of the underlining. The underlining is the unpredictable part.

Stock is at 45, strike is at 45. 1 month to expiry. What's the rough value?

 

[xandman]

Actually, it is. I need to run the strategies under a back tester. An issue is putting these limited loss spreads a back tester.

How would I equalize them? Based of probable/max pay off and TTE?

 

[xandman]

Stock is at 45, strike is at 45. 1 month to expiry. What's the rough value?

You are highlighting the difficulty of calculating probable payoff value in long naked options.

 

[OTM-Options]

What is the most statistically predictable Option strategy?


They all are predictable. Anyone with a basic understanding of options should be able to predict a rough value of the position depending on the value of the underlining. The underlining is the unpredictable part.

Stock is at 45, strike is at 45. 1 month to expiry. What's the rough value?

Need more info:

• Stock price at entry.
• Type of option position (calls, puts, long, short, debit spread credit spread, etc)
• How much credit or debit was the position.
  
• Option expiry date.
• Estimated value of the underlining sometime in the future.

With the above information all option strategies are predictable.

In your example if I bought the 45 calls at $2.00 and I estimated two weeks later the underlining would be trading at $50.00 I can "predict" the value of the calls would be about $5.00 plus change. I can also "predict" the value of the options would be about $0.10 if the stock plunges to $40.00 three weeks after I opened the position.

All option positions are predictable, the underlining is the unpredictable part.

 

[xandman]

I think he wants the rough maths...

=price of underlying x volatility x probability x square root of time
=45 x vol x.50 x sqrt(30)

Going back to probable payoffs of naked options. I think this would mess me up if i calculated probable payoffs with infinity to the upside and a real number for the downside.

 

[newwurldmn]

Need more info:

• Stock price at entry.
• Type of option position (calls, puts, long, short, debit spread credit spread, etc)
• How much credit or debit was the position.
  
• Option expiry date.
• Estimated value of the underlining sometime in the future.

With the above information all option strategies are predictable.

In your example if I bought the 45 calls at $2.00 and I estimated two weeks later the underlining would be trading at $50.00 I can "predict" the value of the calls would be about $5.00 plus change. I can also "predict" the value of the options would be about $0.10 if the stock plunges to $40.00 three weeks after I opened the position.

All option positions are predictable, the underlining is the unpredictable part.

stock price at entry: 45. Short straddle. Received $2. Option expiry 30 days from now. Stock price tomorrow is 45. What's the value of the straddle tomorrow?

 

[OTM-Options]

stock price at entry: 45. Short straddle. Received $2. Option expiry 30 days from now. Stock price tomorrow is 45. What's the value of the straddle tomorrow?

If the entry date was last Friday then I "predict" the value on Monday would be about $2.00 - minus the bid/ask spread.

 

[Buy1Sell2]

Ratio spreads are the least risky and most profitable. However, straight directional trading is far superior. Get right.

 

[taowave]

Ratio spreads are the least risky and most profitable. However, straight directional trading is far superior. Get right.

Ratio spreads is a very loose term.What ratio and why?

By your beliefs,why not trade ratio spreads with a delta?

It appears you have discovered multiple holy grails.

 

[newwurldmn]

If the entry date was last Friday then I "predict" the value on Monday would be about $2.00 - minus the bid/ask spread.

What if there were an earnings release? Or is that not relevant?