"Those" Gray's will never need work another day in their life. Mucho, mucho, mucho dinero from Option Express's public offering..........
We're in the wrong end of the business, bro. When VT goes public we'll be shining Mav's fleet of poloponys.
While I agree that Theta is not an edge. I do not believe your statement that "the delta of any given option is priced very efficiently as to not favor the buyer or the seller" is correct. Specifically, I believe that the price of low delta options are heavily skewed in favor of the buyer. If an option has a delta of 1 - then it is defined as having a 1% chance of settling ITM. Right now you can probably buy a 1% delta put in the S&P's for .10. I believe this premium dramatically understates the value of this put. Put another way, I do not think that .10 adequately compensates the writer of this option for the risk he is assuming. We are one Long-Term Capital, 9/11, Bird Flu epidemic, successful attack on our food supply, etc. away from a catastrophic and discontinuous break in the markets. If one of these, or any other, "once in a lifetime" event occurs, that put might be 100 points in the money with volatility moving to 35% over the course of 1 hour with no opportunity for the writer to cover. So when you say that the price of an option does not favor either the buyer or the seller, I would have to respectfully disagree.
This is Nassem Taleb's Black Swan theory. The question is whether you will live long enough to see a black swan. The edge, if it exists, is tiny and there is a big difference in identifying a statistical anomaly and making money off it.
excellent post , you should re post it here : http://www.elitetrader.com/vb/showthread.php?s=&threadid=49586&perpage=6&pagenumber=1853 Notice that this thread has all ET records ( # of views , pages , replies) , so I guess a lot of people here would disagree with you BTW , do you have any opinion on Reverse Calendars ( one day position , into qtr report/events ) ? This is one of my favor strategies (on the certain stocks , of course) , but there is not so much info on this subject on ET , only a few good posts from Maverick74 from a long time ago.
IV, don't you get tired of bashing the folks on the SPX credit spread thread LOL? Black swan risk is discussed regularly on that thread; they are not ignorant of the dangers but prefer to take their chances...and the money, 90% of the time. Die thread die. I think Tower is on a mission to revive hundreds of old threads.
lol , Mo . Yes , its a dirty job , but somebody must do it The 25:1 r/r ( also add a few SD) , means that you can be right/take money for a long long time , until you don't. hmmm , why are you so afraid to revive the old threads , what are you hiding , MO ???