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Referring to one touch down no touch up (OTD-NTU) option with expiry $T$ as interpreted in your previous question, it might help to formalize the payoff stated in the respective answer. The option pays rebate \$1 at expiry$T$if $$\boxed{ \tau_L \leq T \; {\rm and} \; \tau_L < \tau^H }$$ where: $$\tau_L = \min \; \{t \geq 0 : S_t \leq L \}$$ and$$... 0 Usually, it pays cash upon touching the knock-in barrier as long as the knock-out barrier has not touched first 0 Shouldn't the payoff be explained wherever you read about them? The or in your example implies that either event is sufficient. So in your example, if S>110, done and you get paid (usually paid at hit or paid at expiry is a choice and defined in the term sheet). If that doesn't happen, if you never touch the down, you would still get paid at end (as this ... 1 The design of such a strategy is a complex thing. It involves a trial and error process of looking at historical data on option prices, as well as an understanding of measures such as Vega. All the while knowing that the future will not be exactly like the past. If you look at existing funds that follow such a barbell strategy perhaps it will give you a ... 2 I sent Ernie an email with a link to this question and here is his response: Yes, I agree with you that the strategy there actually is a momentum strategy, not a mean reversion strategy. In other words, if zScore < 0, we actually expect$\gamma\$ to decrease further! The momentum strategy backtested is profitable. I will note this in the 2nd edition of ...

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This seems like a terrible idea. If you can have such an automated system for one stock, you can have it for many stocks. Then, since you're a serious investor, you want to take into account the commonalities and relations between stocks. At the very least, this will allow you to do perform hedging and exploit commonalities between similar stocks. In this ...

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I voted to close this question as it is one of the most frequently asked question (on retail trading "platforms" like Reddit, quora and others). Some examples are 90-90-90 rule. Quora 1, Quora2, and it pops up there roughly ever 6 months. Reddit 1, Reddit 2. People somehow perceive that they know something and can beat the market. Strictly speaking,...

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If retail traders made one 50:50 bet and then cashed out (or didn't), sure. One of the reasons companies are made to put those warnings on spread betting and similar things is that it appeals to a lot of gambling impulses, so for many it is just another way to gamble. Unfortunately people who lose are the ones who are most likely to quit, so this is much ...

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Markets might be nonrandom but retail traders losing money on average is insufficient evidence of this. Most folks lose money playing roulette despite the outcome being random. As noob2 suggests in the comments, the parties enabling the betting earn money from the betters in some way transforming there low expectation gains into losses. In casinos money is ...

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This is for better linearity/normality in the QQ plot at the tails, which as both @noob2 and @rkr allude to, give a better fit and hence better properties for normalizing the residuals with z-scoring later on.

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I'm assuming that the paper you're referring to uses the Engle-Granger test for cointegration. The standard test procedure checks for unit roots in the residuals of a linear regression. It is a "stylized fact" to econometricians, who tend to be the ones publishing papers on pairs trading, that log prices better linearize the features and hence ...

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