I assume that the reference is made to the information propagation that is faster than speed of light. Two particles spread by a significant distance had virtually simultaneous change in spin when one of them is modulated.
Consider the swarming around the perceived less risky strike as being equivalent to the swarm of fish balled up when a threat is perceived. John
Any swarm can be described by just three simple rules: 1. Each member of the swarm is only aware of its nearest neighbors (usually 2- 6 of them) 2. Each member keeps the constant distance between its close neighbors 3. Each member moves in the direction of its neighbors with relatively equal speed.
That's simple. Option premium is set according to IV. IV is the market's *belief* of how volatile a stock is gonna be within some time period. Stocks frequently *do* move this much, as "predicted". The ability to find over and under priced options is key to making money in that game. If the IV is too high, sell premium. If the IV is too low, buy premium.
If that would be as simple as you described everybody on ET would be a millionaire by now. Unfortunately, it is infinitely more complex.
I was just wondering if someone makes a statement such as "options are predicting an X% move for XYZ stock" how did they come to that conclusion? Why not Y% or -X%? What option parameters did they look at to come to the conclusion that the X% move was what the options were predicting to be the "most likely" move for the underlying? It can't be some secret or overly complex calculation because they'll make statements like the above on CNBC for heaven's sake. I just can't find much info about the topic.
Looking at the SPY options, I see that the 95 strike is trading at 31% IV, while the 60 strike is trading at 70% IV. So if IV is the market's predicted volatility of SPY, then what does the market believe? That SPY's actual volatility will be 31%, or that it will be 70%?
I consider CNBC people being as dumb as they come. Their statements are so moronic sometimes they make me sick! No one can say for certain that the price will move X points up or down. I wonder sometimes did anybody actually measure their IQ? I wouldn't be surprised to find it lower than 80. Edit: I should not deviate from the topic of this thread though! My apologies.
This is a very interesting quote. In the past maestro doubted technical analysis. Is this not just like the argument for fibonacci points. As you study what quants do - most of them are really just renaming different types of technical analysis. I see so many statements from quants that sound just like someone putting bollinger bands on a chart or scanning for them in Tradestation. Now we have quants and physicists sounding like fibonacci enthusiasts. I am not doubting you maestro, because when I was younger I made great money trading off the same belief system. I traded million of shares and thousands of trades. It was not just luck as other traders in my office made money doing the same thing. I just used a technical setup - which worked for years. (does not work well anymore.)