Thanks for Sharing this video... I am wary of getting in the middle of this ET mugging... But for those paying attention... ORATS, a website Destrio (very respected option trader on ET) HIGHLY recommends... ORATS, in their Option University Section on their website... Opens with this statement about option pricing models... Option pricing models - ORATS University ~ ORATS.com What is the Black-Scholes Options Pricing model, and why is it wrong? and there are a lot of well done vids on YouTube covering the same theme.... Q.E.D
There's your trouble - at least part of it. So if you observed a crow flying by and within an hour it started to rain - and this happened 4 times without fail in a fortnight - you would assign causation to this without all that pesky math or rigorous testing or analysis? And don't say "no" because that's what you've done here.
Is this another one of your post bragging that you are right while anybody else is wrong? You're too smart for ET. You should join a forum where your ingeniosity will be rewarded and welcome.
That's not what I asked. Your reply actually confirmed what I suspected, i.e., “The novice option traders like you are often stopped by their inability to answer targeted questions.” Many years ago I was studying Taleb’s Dynamic Hedging, and I admit that most of it was way over my head, and I realised that there are much easier ways to make money in options, and I decided to stick with more the practical Charles Cottle’s teachings of dissections and stuff like that. So once I gain, I challenge you to explain to us Taleb’s maths and conclusions in your own words, otherwise, in Nassim’s own words you’re just about muscles without strength and teaching without experience . . “No muscles without strength, friendship without trust, opinion without consequence, change without aesthetics, age without values, life without effort, water without thirst, food without nourishment, love without sacrifice, power without fairness, facts without rigor, statistics without logic, mathematics without proof, teaching without experience, politeness without warmth, values without embodiment, degrees without erudition, militarism without fortitude, progress without civilization, friendship without investment, virtue without risk, probability without ergodicity, wealth without exposure, complication without depth, fluency without content, decision without asymmetry, science without skepticism, religion without tolerance, and, most of all: nothing without skin in the game.” ~Nasim Taleb~
Ok well here ya go...done before breakfast. The problem with current pricing models is probabilities are out of wack and therefore the prices are skewed all wrong. Step 1 is get rid of IV and get rid of all the greeks. The whole system is ambiguous and not even necessary...or accurate. Step 2 use ATR data. We already have all the data available, and it can easily be adjusted to the actual trend. So here are the actual APR12 (10) CLSK prices at 8:40 am, compared to the prices generated on the spreadsheet which are based on the trend adj ATR for the last 14 days calculated for (10) I have only dealt with OTM calls for this example. You can see the otm calls get cheaper the farther out you go relative to the actual prices, and they get more expensive the closer to itm you get.