Discussion in 'Options' started by atticus, Sep 17, 2010.

  1. I'd like to pose a wager in response to this thread on theta as an edge:


    I'll bet anyone on here that I can propose a listed trade (US exchanges), in advance, that will produce at least a 20% gain by the close of trading on 9/24/2010. The trade will be based upon the worst-case inter-exchange pricing at 2:30pm EDT today; and the offset at the worst inter-exchange pricing at 4:00pm EDT on the 24th. I will send the screenshot via email to a new gmail box today, so it will have today's time stamp on it. I will post the email address and password here after 6:00pm EDT on the 24th, provided the bettors have seen it first.

    Anyone can wager (cash) against the proposed gain. Simply drop me a PM or post it here. $100 against hitting 20% gain and only from aliases I know.

    So the question, is this an edge?
  2. Screenshot has been sent to the new gmail address. I'll post the login/pswd after the close on the 24th.
  3. donnap


    It seems to me that a high probability vertical could be constructed giving you an edge on the wager.

    No edge on the spread by itself.
  4. Its not a vertical, but I won't reveal anything else about the position.
  5. Your proposed bet is at edge! The trade might be at edge but there is not enough information to make that determination.

    You could have structured the trade so that there is an 80% chance of a 20% gain and a 20% chance of a loss of 100% of your money at risk. That would be a negative expectation on the trade but still a large edge on your 1-to-1 payoff bet.

    As you said on another thread: "The probability of success is inversely proportional to the payout."

    Is noob-trader really Allen Hobbes? Or do they just dress the same?
  6. Damn Donnap, you beat me to this one! I was writing my reply while you posted.
  7. Noob is "ass rot" stock_trad3r reincarnated.

    The R/R on the trade is 71/100 (rounded). Risking 2.44/1 in absolute terms, but roughly 1:1 risk at 1 sigma up/down.
  8. spindr0


    I wager $100 of ET currrency (ya know, that stufff that posters print here all day long) that if it were me doing this, I'd open up multiple G-mail accounts. One of em has to hit!

    :D :p
  9. isnt that guy basically just selling cash covered naked puts, if goes itm, take assignment and sell covered calls. i dont think there's anything inherently wrong with that, although it's not an edge and i personally wouldnt do it on an index.
  10. donnap


    LOL - remind me to never bet against you, but that thought had occurred to me, too. (uh-oh)

    I think that the point that atticus is making is that you can put on a high probability trade that makes a great looking return from time decay.

    But there is no edge to the trade, just high probabilty.

    (unlike your proposed multiple goog accts. or atticus' wager, where there's an edge - for you guys.)

    How long have you been hearing that there's an edge to selling options? Longer than me, but I've been reading that ever since I started on the yahoo monkey boards way back in the dark ages.

    They say things like,"I'd rather be the house," or "if XYZ is above 50 at expiry I make $1000!!!" And since they know theta, they can sound really, really smart.

    Yeah, by itself, there's no edge to selling premium. Honestly, do they really think that the other side is going to give them an edge?
    #10     Sep 18, 2010