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4

The best answer to your question: back test your ideas against historical data. If you think you can predict the market by learning past patterns prove it by testing it, not by discussion. I've done mistake few years ago and fell in love with one idea, which seemed to be like money printing machine, but instead testing it, I spent month discussing it on ...


3

This really isn't worth the bounty, but it's too long for a comment. Quoting https://www.tradeking.com/education/options/option-greeks-explained#theta At-the-money options move at the square root of time. This means if a one-month ATM option is trading for \$1, then a two-month ATM option would be trading for 1 x sqrt of 2 or \$1.41. A three-month ...


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Draw a picture. For each scenario, there are obvious circumstances that the payoff for each would be better. For the N day option, the payoff would be better if there was a slow gradual decline in price and a slow gradual increase over the same period, such that the final difference in the price of the underlying was largely unchanged. For multiple options ...


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I would do regression analysis with a dummy variable. Take a large sample of companies, and add a 0 - 1 dummy variable where that variable is equal to 1 if it meets the momentum and refi criteria, and 0 otherwise. The coefficient will indicate the magnitude and the t-statistic the significance.


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Strategy A has fatter tails and should outperform when the volatility surface is convex. Note that both strategies have the same average option maturity = N/2 days. However, for Strategy A option maturity fluctuates between 0 and N days, while for Strategy B the average maturity is always N/2 days (after the initial N day run up to full investment). For ...



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