Not only that, but the Summa article on which it was based appeared in TA of SC. Summa is even a published author on futures options.
The fact that the game gives you a zero expectancy is good news. No one should get depressed because of this. Not having a negative expectancy is a huge benevolent thing. Take a look out of the window; there are more ordinary women than beautiful ones, more ordinary cars than Ferraris, more ordinary people than rich people. Not to mention that probably every gambling game in the book gives a negative expectancy to the player. In a world where the odds are against you, enjoying a zero expectancy may be an edge. As the old saying goes... "In the Blind Men Land, if you have one eye you become the King". There isn't a formula to get rich - and if that thing existed, everyone agrees it wouldn't last much. If such thing as a option strategy that gives a positive expectancy no matter what existed, a basic computer program would get anyone rich. And everyone rich = oxymoron. Wealth needs the pyramid concept to survive. Bottom line is: Thank God math is not against you. Learn how to work on the grey area. Keep your eyes opened always. Be dynamic. Be ready. Be smart. No one in this world has the ability to predict the future, but this same world has a lot of rich people on it. And never forget that while the market follow mathematics principles, it doesn't end there. Albert Einstein (I said Albert Einstein) believed, according to his own words, that "God doesnt play dices". He meant that there is no contingency in the world. No randomness. Everything follows a rule.
Hmmm. Maybe you could start where you left of. You tossed us a bone about adjustments being able to turn a series of option combinations, that for themselves have all zero expectancy, into something that does have a non-zero expectancy. It would be sad to let this important line of thought get lost in the woods. Ursa..
I would just like to post a quick "thank you" to you all who have posted in this thread. I've been trading options for a little while now, and have actually enjoyed some pretty good success. However, after reading this thread you guys have taught me a lesson that I now realize Mr Market was preparing to teach me. Honestly, I can't express enough thanks for teaching me that lesson for $0. Many thanks, keep up the great work! - The New Guy
Once you are in a trade and the underlying moves, you have the opportunity to make adjustments that will create a positive expectancy. For example, say you buy an ATM straddle today in EBAY. Now this trade in and of itself has a negative expectancy. But let's say EBAY rallies 6 pts over the next 3 days. If you sell some of your long deltas there, you are creating a positive expectancy trade. Not by much, but you will be positive. What you are essentially doing here is locking in profits, but you are still in the trade and your adjustment has improved your trade. Let's take another example. Say you bought some wings today in EBAY on both the call and put side. Now, let's say EBAY rallies 6 pts over the next week. Now you go in and sell some inside premium creating a condor. You now have a positive expectancy. In reality what you did was leg into a condor at really great prices. But once again, you moved the trade over to a positive expectancy trade. Now, just because you have positive expectancy does not mean you will make money. In fact, you only have a slightly positive expectancy. But you see the point. So the idea is to put on trades that down the road will allow you to make positive adjustments to your trade. Now something else to add here. The timing of the adjustment and what the adjustment is will be very important. You can't just do anything to your trade to create a positive expectancy. This is where great traders are made. A great trader manages his positions very well and always adds value to his trades.
once again, fantastic input maverick74... ! thanks!! don't get frustrated... remember (to paraphrase): "....for those with understanding no (little) explanation is necessary... while for those with no clue (limited understanding)..... (usually) no explanation is enough". Ice now if I can only fill my KLAC options @ my price.
of course... in keeping with the theme of this thread... if I do get filled "at my price" that signifies I (likely) overpaid or sold too cheap! :eek: :eek:
short front klac 50 straddle (legged in); also positions in SOX/klac stock. idea is to lift 50c... reverse long (looking for klac >52.50). convert shrt 50p to time spread. actually I am ratioed on -50c
Sure. Very easy to understand... Well then, how about your expected positive or negative return in % for this trade compared to your average trade.