What makes you say an option is overpriced/underpriced ?

Discussion in 'Options' started by kivd, Aug 25, 2011.

  1. Check your P&L on exit or expiry. If it's positive, the option was underpriced, if you made a loss, it was overpriced.
     
    #21     Aug 28, 2011
  2. How do you know the probability is 50/50?
     
    #22     Aug 28, 2011
  3. HELP WANTED I need a knowledgeable trader. I put up $100,000 you put up nothing.

    My cut is the first $10,000 each year, you keep the rest.

    Apply to this thread
     
    #23     Aug 28, 2011
  4. sle

    sle

    Because it's the fair price for a digital option and you could perfectly hedge it there (barring transaction costs).
     
    #24     Aug 28, 2011
    Gambit likes this.
  5. I'm in.
     
    #25     Aug 28, 2011
  6. spindr0

    spindr0

    I'm in too - I saw no reference to shared losses :)
     
    #26     Aug 28, 2011
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    #27     Aug 28, 2011
  8. sle

    sle

    Did I somehow suggest that it's riskless? I said it's consistent - meaning, you realize a reasonable return to risk ratio.
     
    #28     Aug 28, 2011
  9. To the extent you're continuing to feel generous, any chance you'd be willing to go through an example of how you'd identify and play an earnings vol dislocation?
     
    #29     Aug 29, 2011
  10. jtunner

    jtunner

    How about a reliable return of 40% on max 5 mill with the options strategies you mentioned?
    Is this in the realm of what is possible?
     
    #30     May 16, 2018