McGinnis was dropped on his head. A 10D is approx a 10% prob of expiring ITM and a 20% touch probability. Those garbage wings are stops for hedgers. Shorting deep wing strikes is analogous to underwriting disaster insurance. You are the end of the line reinsurer—there are no hedging options available.
K, regardless, is the probability of touch really additive like that? I can't believe 10D condor statistically has 40% of being ITM at some point over large sample size. Both sides being ITM at some point must be miniscule, no?
The probability of touching one strike, dude. A 10D STRIKE is <roughly> a 10% probability of expiring ITM or a 20% probability of touching. What is the probability of an ATM digital expiring ITM? This isn't quantum mech here. Vanna-volga for valuation (of touches/American barriers). It's all about the proximal strike. I'm not your daddy.
Ya I think his math was off on accident ... Its all good I know what he meant .... Hopefully haha. So SPX you can't excercise early so that seems more risky.. ?? That's one of the bigger reasons I chose SPY. SPX seems bang or bust and kinda not my style. Unless I can get wider ranges in SPX to limit the risk?? I'd still be looking at 10 Delta or sub 10 Delta option on it
I really appreciate you even taking time to answer my questions. Unfortunately, your answers mostly go right above my head. I don't know if it makes any difference for options trading (like in decisions to roll), but what is a probability of below happening for 10D IC? If I understood you correctly, it's irrelevant. Well, that's why I'm asking ... what was the point he was trying to make( numbers aside)?
Not sure on probablity of the above happening unless you were in a crazy high volitile trade... Or your spread was not very big... But at 10 Delta it would be decent enough to prevent this I would assume ...
So are you saying 10D is too far OTM? If something happens I don't have much wiggle room to help myself?