tag:blogger.com,1999:blog-1520302325239963360.post694887495891220205..comments2024-01-23T14:04:29.555-08:00Comments on Risk Laboratory: Ophir Gottlieb: VIT (VanceInfo Technologies) - Time Spread and Vol SaleOphir Gottliebhttp://www.blogger.com/profile/14504557662647338626noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-1520302325239963360.post-16661587721021828852010-09-30T10:39:00.120-07:002010-09-30T10:39:00.120-07:00If you back out the probabilities using he iv of t...If you back out the probabilities using he iv of the trade, it should come out exactly to fair value (and the you lose to commissions and slippage). The trick is to find vols you believe are "not correct."Ophir Gottliebhttp://www.blogger.com/profile/02699643319377083669noreply@blogger.comtag:blogger.com,1999:blog-1520302325239963360.post-20350718395811654162010-09-30T10:36:42.602-07:002010-09-30T10:36:42.602-07:00Well, I'm not taking posts as recommendations ...Well, I'm not taking posts as recommendations to trade either, just really interested in methods you apply to analyze possibilities. My concern while I'm learning stuff that is it seems to be no reliable math methods of guessing of the outcome of the trade. Like if (case#2)it is known, that at 50% probability stock will pin at 30 on expo in Oct and 50% that it will out of [$27.25, $32.75] range than mathematical expectation is positive for the trade given max loss is less than credit and equal probabilities of 50%. As there is a no(?) way to calculate exactly the probabilities, I wonder how pros going around it other than plain throwing darts...Alexeynoreply@blogger.comtag:blogger.com,1999:blog-1520302325239963360.post-1283419011710477272010-09-30T10:05:41.137-07:002010-09-30T10:05:41.137-07:00There is a rough way using the log normal distribu...There is a rough way using the log normal distribution and using the implied vol of the options as the "std deviation." Of course, the trade tries to bet that the std deviation "will be" lower than the options imply, so that sort of defeats the purpose of the probability analysis.<br><br>Just another diclaimer here: I am not recommending these trades. This blog is a teaching tool and analysis, not recommendations.Ophir Gottliebhttp://www.blogger.com/profile/02699643319377083669noreply@blogger.comtag:blogger.com,1999:blog-1520302325239963360.post-11825953620840674252010-09-30T10:01:05.492-07:002010-09-30T10:01:05.492-07:00I like #2, but is it possible to guess somehow bas...I like #2, but is it possible to guess somehow based on information available what is the probability of the stock to stay within [$27.25, $32.75] in 3 weeks? Thanks!Alexeynoreply@blogger.com