Actually, it is. I need to run the strategies under a back tester. An issue is putting these limited loss spreads a back tester. How would I equalize them? Based of probable/max pay off and TTE?
Need more info: Stock price at entry. Type of option position (calls, puts, long, short, debit spread credit spread, etc) How much credit or debit was the position. Option expiry date. Estimated value of the underlining sometime in the future. With the above information all option strategies are predictable. In your example if I bought the 45 calls at $2.00 and I estimated two weeks later the underlining would be trading at $50.00 I can "predict" the value of the calls would be about $5.00 plus change. I can also "predict" the value of the options would be about $0.10 if the stock plunges to $40.00 three weeks after I opened the position. All option positions are predictable, the underlining is the unpredictable part.
I think he wants the rough maths... =price of underlying x volatility x probability x square root of time =45 x vol x.50 x sqrt(30) Going back to probable payoffs of naked options. I think this would mess me up if i calculated probable payoffs with infinity to the upside and a real number for the downside.
stock price at entry: 45. Short straddle. Received $2. Option expiry 30 days from now. Stock price tomorrow is 45. What's the value of the straddle tomorrow?
If the entry date was last Friday then I "predict" the value on Monday would be about $2.00 - minus the bid/ask spread.
Ratio spreads are the least risky and most profitable. However, straight directional trading is far superior. Get right.
Ratio spreads is a very loose term.What ratio and why? By your beliefs,why not trade ratio spreads with a delta? It appears you have discovered multiple holy grails.