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seen Apr 11 '12 at 11:58

Jan
10
comment What is the optimal strategy when there is an equal chance for gain or loss but the size of the potential gain is larger?
Related, do you by chance know of any formulae that describe "dollar-cost-averaging" for short term applications. E.g. if an instrument varies approximately 20% a day in price, are there formulae that describe the effect of purchasing this instrument perhaps 10-12 times over 3 days at regular intervals, always spending the same amount, to average one's price down? Of course not every trade will succeed, as the item purchased may not rise back up, but is there formula that can help understand this better? Thanks much.
Jan
10
comment What is the optimal strategy when there is an equal chance for gain or loss but the size of the potential gain is larger?
Thanks much for your detailed answer. I am surprised at how high the ratio (0.5072) came out with these numbers.
Jan
9
comment How sensitive are vertical spreads to changes in implied volatility?
Thanks Glyphard. I'm curious, is there a reason for what you noted in regard to the PnL line, i.e. flattening on an increase in volatility, or steepening on a decrease in IV?
Dec
15
comment Calculating Theta assuming other variables remain the same
Brian, if the option is purely out of the money (i.e. all time premium), doesn't theta just say, it's going to decay at this rate, this far from expiration (i.e. be the derivative of the standard rate of decay curve)? So, volatility (or other factors) can jack up an options price, but given that price on any particular day, can't one then pick the rate of change off the curve (per days of expiration), and come up with a theta value?
Dec
5
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
They have a $1 option, to approximate the buying/selling the index.
Dec
2
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
Geeze, missed that.
Dec
2
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
E.g. as an example, my brokerage charges 8.2% interest to short a $25,000 position, so that would significantly change the return of the pair, as far as I can see. Thanks.
Dec
2
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
Thanks Tal. There is both the index, e.g. AVSPY (NASDAQ OMX Alpha AAPL vs. SPY Index), and then separately options on that index (which I have yet to digest, if their equations, etc are the same; please comment if you know). Doing the long-short pair may cause one to have to pay fairly significant interest rates charges on the short, which changes the return substantially (e.g. I guess your comment on dynamic replication"?)
Dec
1
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
... I'm indirectly questioning / trying to understand better the merits / detriments of this type of investing (i.e. anything non-obvious).
Dec
1
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
Any idea how popular "pairs" trading is? It seems with many stocks having very high market correlations/everything tends to move together with the euro debt crisis, it isn't very popular?
Dec
1
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
E.g. perhaps use less of one's cash balance available for investment (generally speaking)?
Dec
1
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
Thanks Chris, sorry, edited my comment. Why even have Alpha Indexes then? Is it the options capability on them, or do they behave differently in some way? Thanks.
Dec
1
comment Buying one company or index against another, is this readily possible with options, with an accurate return (also Alpha Indexes)
Thanks. So to simulate AVSPY (Apple vs SPY), one could simply buy Apple, and short SPY? Would one need to match up the amounts bought / sold to 1 to 1, to do the equivalent? Secondly, why even have Alpha Indexes? Is it for the options capability, or ?
Dec
1
comment Given markets usually fall fast and rise slowly, are there trading mechanisms to take advantage of this?
Perhaps you can generate another question to help clarify this subject further. I'd love to know (i.e. please comment here, if you do), thanks.
Nov
29
comment Given markets usually fall fast and rise slowly, are there trading mechanisms to take advantage of this?
Thanks Lliane. Did you see Tal's comment above, also DKM's answer below? Thoughts?
Nov
28
comment Given markets usually fall fast and rise slowly, are there trading mechanisms to take advantage of this?
Can you please give an example of how it is "already priced in"?
Nov
28
comment Given markets usually fall fast and rise slowly, are there trading mechanisms to take advantage of this?
Can you please clarify the term "90% puts and calls"?
Nov
28
comment Do markets typically fall fast, and rise slowly
Thanks Bootvis and Patrick for enhanced explanations.
Nov
27
comment What are good conditions to roll a leap further out in time?
I see. Is it then best to do the roll on low volatility, since let's say on high volatility the option prices are \$5 and \$8 respectively, creating a ratio of 8/5. If on a low vol day, the 6 month option decreases to \$3.50, then 8/5 * 3.50 = 5.60, requiring an additional \$2.10 to be spent to roll, instead of the additional \$3 required. I.e. if the ratios stay the same, then it seems it would be best to do it on low volatility? ... I'm not sure, just trying to figure out my strategy going forward. Thanks.
Nov
26
comment Do markets typically fall fast, and rise slowly
Thanks. Can you expand just a bit on "positive kurtosis (> 3)" -- i.e. give more feeling/understanding for that statistical quantity.