Hi @beerntrading Please , What is the software to make this kind of 3d graphics. It is very interesting. It is posible to represent all kind of option strategies or only the basic ones. Thank you
If I follow your logic: In that case what if you are your own government, mandate reserves to cover big loss? If so perhaps you can be printing money going short?
And who are all the buyers of your shorts? Seriously, I want to know if there are any studies on who the stupid buyers are (other than me on occasions): small retail mom and pop, gamblers, speculators, institutions, hedge funds...? Thanks.
You mentioned 22k in profit and based your returns on the leveraged amount of 5 million. But you didn't say how much capital you started with and how much you ended with?
That's not really the point. What you're asking is "what was your percentage gain on margin". That can vary widely depending upon allocation of capital. Besides "how much one tranch of capital is leveraged is irrelevant to total capital.
I presume you can model any strategy with it (ordinary strategies or custom). I don't know the software offhand. I don't use it, and it's not a common feature, that's for sure. I searched Google for that image. I find it mostly conceptually useful because you're still one axis shy of modeling it fully with volatility...and then bid ask spreads (and how the fluctuate relative to volatility) make the real curve a little fuzzy. Then you overlay the integration of the normal curve for likely expiry prices vs. The likelihood of hitting a target / stop...and what you base the stop on (underlying makes more sense than the option itself for anything more than 1-leg spreads to me)...and how that stop changes with time...and then you overlay your directional call hit rate... There's a ton of moving parts to it, and each had the power to overcome the others to turn an otherwise good call bad (but also bad calls good)....it takes a long time to get a conceptual grasp of them. If you're a successful price player I small moves they offer you nothing. If you look for breakouts / down, the offer leverage or downside protection. If you're not good at price plays, they offer a mechanism to shift the odds substantially in your favor.
I read and re-read your comments several times and still cannot understand what you said. Many of us are not pros so can you explain in lay person language to make it easier for us retail traders? Thanks.
Sorry...I actually meant for that to be confusing. It was more to illustrate the complexity than try to explain it. And I'm by no means a pro myself. But...my point about the normal curve (a bell curve) is that is you take it's integral (using calculus to figure out the area under the curve) it will always equal 1. The why and how of it is less important than the fact it does. It's how options calculators calculate the chance of hitting a given price, i.e. When it shows a 30% chance of profitability, it means the bell curve's area above that price is .3...but you can take all this info from a platform with their likelihood of hitting a price by a certain date or closing above oh a certain date. If you take your expected gain / loss vs. Price on expiry, and multiply that by the normal curve, you get "expected profit". (Be mindful that on long options this figure is hugely inflated because you cut one side of the curve at the strike, while the wing of the curve gets a lot of really high values, even lightly weighted will still push that number up). I also have my doubts that prices truly fit a normal distribution...but that's a different story. Options aren't really that difficult that understanding all of the above is necessary (in fact I take huge shortcuts that preclude consideration of most of that). My big point is if you're good with price movement and have the capital, trade stocks or futures. Options will tax a lot of time and brainpower that could be spent looking at price. But, there's also a lot of ways to make money with options as price plays, or price agnostic.