Tag: author
Models and their limits
Where models become useful is in how the various attributes of an option are quantified and placed on a graph (at least mentally) to make sound judgments about whether one…
Read More »Implied Volatility Collapse
Because the public cannot trade options after Friday’s close, speculating on these positions must assume that price will move after last trading day but before Saturday expiration. Traders have no…
Read More »Expiration Short Strategies
It is more profitable to sell extremely short-term contracts, whose time decay will be rapid and immediate. Another benefit of the short-term strategy is that it reduces exposure time from…
Read More »Managing Volatility Spreads
A popular feature of spread selection is the assumption that mispriced options are found frequently. This observation leads to a natural conclusion, that is makes sense to take up a…
Read More »Fat Tails and Option Returns
Fat tails can be graphed to show that tails are greater than normal distribution. On the well-known bell curve, probability of outcomes are most likely to occur at mid-range,…
Read More »Does “Managing Winners” Add Value to Short Strangles?
Thanks to the help of a Steady Options member who deserves the credit for co-creating a web based backtesting tool with me, I can quickly test varying short strangle techniques on…
Read More »Cyclical versus Historical Volatility
In this belief system, historical volatility is backward-looking and refers strictly to the price behavior of the underlying. Implied volatility is an estimate of the option premium’s future degree of…
Read More »Day Before Expiration Trading
In cases when earnings and dividends are timed for this day, a range of separate risks and opportunities must be considered. The uncertainty of earnings surprises on expiration Thursday…
Read More »Accurate Expiration Counting
Most listings report days to expiration on a calendar basis. A one-week expiration is expressed as 7 days, even though only 5 trading days remain. The defense of using calendar…
Read More »Ranges of Exotic Options
Asian Option has a payoff decided by the average price of the underlying during the option’s life. Also called the Average Value Option, it may be set up with a…
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