Well, think about it this way (to use an exaggerated simplistic example)... I think there's statistical evidence that suggests that, over any 5 year period, S&P always ends up higher at the end of the period (or something to that effect; I think it might actually be true, if you consider total return). Does that mean that shorting S&P ATM puts is a no-brainer strategy that's guaranteed to work? Not likely... In general, there are lots of threads discussing these subjects on this forum. The upshot is that statistical "edge" is a necessary, but not sufficient condition for profitability.
Well, you also need to consider the drawdowns for the strategy (likely and max). If you can easily handle the mark-to-market losses, you maybe got yourself a winner. At any rate, this all just my Z$2c...
thanks for the input, really appreciate it. you should also look up don johnson, i feel like its the most similar to options trading.
I this this thread may be off the mark. Other people are beating Black by cheating. Here is the URL to a legal case in London that Phil Ivey lost:' http://www.washingtonpost.com/news/...ng-by-casino-loses-court-case-and-12-million/ Method is to convince a dealer in a Casino that use asymmetric card backs to stack the cards type by edge. The player then reads the edges in the shoe (immediate 5-6% player edge). Most probably the dealer was paid to help with the stacking. I think one needs to be able to predict market direction or IV direction with some success to make money in options. Blackjack profit is maybe closer to HFT that locates nearer to exchanges so that the NBBO system can be front run seemingly with the blessing of the SEC and its lobbyists.
well, i dont think you need to predict the market. if you believe in the efficient.market. theory then playing probabilities would be your best bet and having appropriate win:loss rewards.
==================================================================== He managed a race track in PA just outside Phila ======================================================= He managed the Parx race track for some time and where he became interested in gambling and became a good handicapper with the horses ( IN Pa outside Phila) I think he had a degree in math if i recall Interesting documentry of him on Netflex cheers john
(the answer I posted to your question in a different thread) The probability analogy between blackjack and trading is a huge stretch. It's true that playing probabilities in blackjack and poker do confer an edge in these games, but Tom seems to forget that in trading, the cards don't have a static value. In other words, while an ace and a ten is always a blackjack, in the markets that's not always true. In the markets, the decks change and the value of cards also change, sometimes day to day, some other times cycle to cycle. Sometimes, investors applaud good news and buy. Other times, good news is interpreted as bad news, and they sell. And once in a while, something out of the left field happens and everything changes. So, in practice, if you go down the option chain, and see that $ 56 strike in 30 % out of the money. Price distribution dictates those probabilities, but then Putin declares war on Ukraine, a pipeline blows up somewhere, or some pyscho guns down 10 guys in Time Square, and you have been dealt a whole new deck with zero aces, and 56$ moves from 30% out of the money to 100% in the money in a flash. Or suddenly, economic factors, earnings, or support and resistance have no value to investors, the only thing that matters now is the FED. Again, a different deck with different probabilities from the previous cycle. It becomes similar to playing blackjack and every time you pull an ace and a ten you don't know if it's a blackjack, or the house started assigning a value of 2 to the Ace, and you end up with 12 instead. It's very fluid in the markets.
I agree that there are different variables in the market compared to blackjack, but if you're under the belief that option prices and stock prices are normally distributed, then you need to act according to that belief no? How do you go about selecting trades?