Anyone has pointers to methodologies in constructing a "risk" or "sentiment" indicator? Risk appetite RORO skewness FX corr
For which type of trading assets? Stocks? Options? You have to differentiate between assets with expiration and assets w/o expiration. And generally the volatility is the main part for any risk calculation. Search for "probability-weighted", "probability-weighting", ...
No, when you buy an option, the risk is bounded, predetermined prior to a trade. It is probability based, similar to a stop loss in trading. The risk management part does come into play, by not putting all your money on one trade. That is gambling.
True, BUT this does not necessarily mean risk is always capped With some options strategies the risk can also be "unlimited", ie. +inf For example ShortCall has unlimited risk potential. And also ShortStock. Update: sorry, I misread as @ironchef means long option trades only, excluding short option trades. My above answer is about short options...
Short call: you write, not buy. I only buy single legs, don't write single legs or trade combinations.
The one advantage of buy (long) single leg that most retails overlooked is you are in total control. Yes, you pay for it but if you think about it carefully, that is a tremendous advantage in an ocean full of sharks.
True, but I like to use a "halfways similar" solution using options writing... Maybe just a psychological issue with me...