What makes you say an option is overpriced/underpriced ?

[Ghost of Cutten]

Quote from kivd:

How can I determine this?

Check your P&L on exit or expiry. If it's positive, the option was underpriced, if you made a loss, it was overpriced.

 

[Ghost of Cutten]

Quote from sle:

Actually, some of the probabilities are known perfectly well. Lets take a super-simple example - probability of s&p being below or above the Fridays close this coming Friday is 50/50. If you think that it's mumbo-jumbo and the price is different, give me a call, we'll trade.

How do you know the probability is 50/50?

 

[oldtime]

Quote from sle:

I am flattered - you actually replied to every one of my comments from yesterday. That makes me feel special (or makes you a stalker).

In any case, it is pretty hard to find even a single knowledgible trader that would be willing to work for 100k, less so a thousand ones. The key problem in capacity constrained strategies (e.g. 10 strategies x 10k/a) is that the amount of time spent developing and monitoring them is too large compared to the potential income. A simple example - looking at earnings vol for mid-cal and small-cap companies. Whilete there are usually dislocations, volume is insufficient to scale up past a relatively small private account.

HELP WANTED I need a knowledgeable trader. I put up $100,000 you put up nothing.

My cut is the first $10,000 each year, you keep the rest.

Apply to this thread

 

[sle]

Quote from Ghost of Cutten:
How do you know the probability is 50/50?

Because it's the fair price for a digital option and you could perfectly hedge it there (barring transaction costs).

 

[atticus]

Quote from oldtime:

HELP WANTED I need a knowledgeable trader. I put up $100,000 you put up nothing.

My cut is the first $10,000 each year, you keep the rest.

Apply to this thread

I'm in.

 

[spindr0]

Quote from oldtime:

HELP WANTED I need a knowledgeable trader. I put up $100,000 you put up nothing.

My cut is the first $10,000 each year, you keep the rest.

Apply to this thread

I'm in too - I saw no reference to shared losses

 

[oldtime]

Quote from sle:

It is fairly easy to consistently make a 100% return in options on something like $100 or $200k (i could name a bunch of things i'd look at in this case).

 

[sle]

Quote from oldtime:

Did I somehow suggest that it's riskless? I said it's consistent - meaning, you realize a reasonable return to risk ratio.

 

[jtrader33]

Quote from sle:

A simple example - looking at earnings vol for mid-cal and small-cap companies. Whilete there are usually dislocations, volume is insufficient to scale up past a relatively small private account.

To the extent you're continuing to feel generous, any chance you'd be willing to go through an example of how you'd identify and play an earnings vol dislocation?

 

[jtunner]

The beauty of the options market is that it has a huge number of moving parts and there are always opportunities. The unfortunate (or fortunate, depends which side of the fence you are one) thing is that these opportunities (especially the ones that persist) are usually not large enough to be interesting. It is fairly easy to consistently make a 100% return in options on something like $100 or $200k (i could name a bunch of things i'd look at in this case). It's pretty damn hard to have a reliable 10% return on a $100mm.

How about a reliable return of 40% on max 5 mill with the options strategies you mentioned?
Is this in the realm of what is possible?