<<< - The payoff (premium) of a higher volatile options is lesser than that of a lower volatile options. >>> Repeating the same mis-statement will not make it true. <<< Downside is limited, but Upside is unlimited... (hint: a stock cannot fall below 0... >>> You don't need a stock to drop to zero to wipe out your account. If you have a portfolio of credit spreads, and they all drop a penny below their strikes, due to some market event, your account is wiped out.... minus any credit you've brought in. (Unless you've reinvested those credits in additional spreads..... which have also been wiped out.) <<< The trade isn't a winner or a loser until the entire position is closed. In the mean time strategic position management together with strategic money management should be (has to be) applied, if necessary. >>> Money management should be considered BEFORE the trade is initiated. "Strategic position management" is code for taking losses on a deteriorating trade, or locking in gains early on a profitable one. <<< - Don't forget Theta, aka the time decay... >>> That statement by itself means nothing and serves no useful purpose. A more useful statement would be.... decide if you want Theta working for you or against you.
People like you will never understand it as it's maths for quants, not for ignorants. ...hey, this rhymes... :
You are as usual talking BS (by this I don't mean Black-Scholes ), b/c it's exactly the opposite of taking losses. It's about avoiding losses by strategically managing the position size using the right market timing(s). Money management cannot be static as you seem to think, it must be dynamic for the whole duration of the trade, not only at position opening. It's called "position management" or "managing a position" and includes money management and risk management...
Yes, I studied especially the Black-Scholes formula, and even made the Ito-Lemma used therrein unnecessary, still getting the same result., ie. I improved/simplified the formula. I'm a professional senior programmer, I also have some experience in using quantlib, if you know what it is... What about you? Are you a quant? I doubt it.
I am nearly rolling on the floor. Are you bwolinsky's twin? If by "quant" you mean "quantitative trader" then yes, I am a quant. Oh, and yes, I know what quantlib is
No, you are not a quant b/c the definition of a quant is not that what you think it is. A quant is a mathematician in finance.
I am sorry, are you a mathematician or a "senior programmer that has used quantlib"? PS. I am kinda suspecting that you are simply taking a piss and I am falling for it...