Volatility
“Lottery tickets are a tax for people who are bad at math…”
Just saw a probability analysis on lottery tickets and will probably never buy another lottery ticket again. Basically, it was a reminder of what the odds are. Yes, trading is a much better way to go once you know what you’re doing that is. For instance, this presentation was actually about volatility and why it’s important to known when it’s unusually high and thus options are expensive — both of which affect the probability of a trade being profitable. Depends of course on whether your buying or selling but still important to know what the volatility is nevertheless.
A few more key points:
- To see if an option is expensive or a good value, check Black-Scholes model to find true value of option and compare to what’s it’s selling at
- The VIX may spike but over time mostly moves sideways
- Bullish direction and high volatility –> be the seller –> sell puts and buy back at lower price later
October 13, 2007
Conferences