I used to play with futures but, right now, I am learning about options. While playing with futures, I would wonder how to increase my reward to risk ratio. Such as using stop loss and scaling up in size while my trades turned out to be favorable. On a graph, it transforms the trade into a convex function rather than a linear one. In a way, what I was doing was to increase the Gamma of my positions. Right ? To leverage such a getting more delta from each price increment .. Well ... What I am looking for with options is convexity. Being able to be convex without leveraging, without increasing my risk. What would be the strategy that have the biggest reward to risk ratio ? I'am not concerned with the expected value of the strategy. Not talking about probability, but asymmetries. I know that buying way out the money option is such a strategy. But analyzing those setups with IB tells me that the ratio is about 1 to 4 ... Where I was actually able to expect a 1 to 10 ratio with futures and some tweaks. How does one increase that asymmetry ?
Maybe Sergio, maybe. But let me some time and I'll prove you're wrong. Let just clarify what you mean by OTM options. 'Cause I don't want you to nitpick on that latter. I could be as wrong as you by saying exactly the opposite. That playing the sure thing is a winnin' game.
Spread scanners with flexible parameters provide that optimization across many securities, if needed. You can goose convexity using spreads requiring little capital and to dizzying proportions. Do that crazy spread with a volatility ETF and you have a nuclear bomb. Also, you still need to be forward looking on how the skew and forward curve could evolve.