Iron Condor When/how to adjust ?

Discussion in 'Options' started by grainmerchant, Jun 2, 2007.

  1. For those who are not aware, TOS gives you the prob of touching and expiring in their platform. Works well if the volatility inputs are 'correct' :). But then, coming to think of it, everything works well if the vol guess is good.
    db
     
    #41     Jun 8, 2007
  2. You can do a monte carlo simulation to find the probability of touching. I used to use POT in my trading, but recently I don't use it anymore.
     
    #42     Jun 9, 2007
  3. There is inherent edge in premium selling. Discuss.
     
    #43     Jun 9, 2007
  4. So as long as I know what to do a 3% one day drop won't hurt me. Sweet.
     
    #44     Jun 9, 2007
  5. Yes you could use monte carlo, but I find it too long winded for the same result which can be calculated by formula.

    I constantly use probability of touch in my trading.
     
    #45     Jun 9, 2007
  6. #46     Jun 9, 2007
  7. Prevail

    Prevail Guest

    my statement is for the spx, and uses vxo as the input, which is known today, and the numbers are correct.

     
    #47     Jun 9, 2007
  8. I have to disagree with this statement. I want to also say that I love, love to sell premium, all the time. I try to get net long contracts, short gamma. Whenever I'm too short gamma, I'm at blowout risk if the underlying makes an enormous overnight/ weekend move. Plus it eats up all my buying power, and reduces returns for all the capital it takes to carry tons of short vol. The short gamma acts as an equalizer to the long theta. Those two risks counterbalance each other.

    If there was an edge in selling, there would be no bids in the options mart (ignoring moneyness).
     
    #48     Jun 9, 2007
  9. I once used the formula found in riskmetrics, but found that sometimes it gave a result greater than 1, and so I don't trust the formula anymore. I don't have enough math skill to derive the formula myself.

    In fact, in the article that I read, it indicated that the results of the formula and monte carlo simulation were different.

    Can you publish the formula? If I get an accurate formula, I get find POT in real-time.
     
    #49     Jun 9, 2007
  10. Prevail

    Prevail Guest

    are you using backspreads to accomplish the net long?

     
    #50     Jun 9, 2007