mange profitable directional options

Discussion in 'Options' started by zxcv1fu, Aug 17, 2006.

  1. let's say that a 30 $ stock with IV of 40 has a 10% odds to be above 35$ in 30 days.
    If two weeks from now stock is at 36$ , will you continue to hold it ? Or take a profit ( close an entire position , or sell 35 put , etc,etc) ?
     
    #21     Aug 21, 2006
  2. Do you mean the prob of touching or prob of expiration is 10%?
     
    #22     Aug 21, 2006
  3. either one of them can be used. In my example above ( very similar to his YHOO situation) , both methods would of show almost the same results ( at extreme).
     
    #23     Aug 21, 2006
  4. I really don't know. If stock price movement is pure random, its future price depends on the standard deviation, and the current price. So when you know the current price is 36, the probability of going up and going down is close to 50%, independent of the past history.

    If you use TA, the stock might be overbought, but it can be over-extended for a longer period.
    The decision depends on how you predict the future movement.

    That being said, I will book part of the profit.:p
     
    #24     Aug 21, 2006