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Onno:
I think I've read that the distribution for financial markets is more
nearly a log-normal distribution; however the tails are thicker meaning that
there is more data that lies outside the log-normal distribution.
I think I saw this in a book about chaos in the financial markets, possibly
by Peters.
Lionel
-----Original Message-----
From: Onno Goedknegt <goedkneg@xxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: Monday, August 03, 1998 2:07 PM
Subject: Fishback's ODDS
>Hi everyone,
>
>A few days ago I received Fishback's ODDS book and video.
>
>ODDS principle:
>1. calculate historical volatility using a spreadsheet
>2. by using statistical analysis (normal distribution: Bell curve)
>calculate the probable price range in the coming period
>3. sell a stangle with stikes at the extremes of the price range
>4. protect this short position by buying a higher call and a lower put
>
>My questions are:
>1. can normal distribution be used to predict prices in the financial
>markets?
>2. which period is the best to use for calculating historical volatility?
>3. can historical volatility tell you something about the future prices?
>4. can you earn money using this ODDS method in practice
> (remember bid/ask, commissions, slippage etc.)?
>5. I don't understand the similarities between the ODDS system explained
> in the video/book and the ODDS system in Metastock 6.5 ? The only
>similarity I can see is: use volatility in option trading.
>6. ODDS was published in 1994. In those years OEX volatility was much lower
>than today. Maybe ODDS doesn't work that well anymore in 1998 and maybe
>that's the reason it's now published...?
>
>I found it interesting to read ODDS. I have the impression ODDS can make a
>profit in the long run, because it is a "continuous strategy". You don't
>have to wait for a buy or sell signal.
>But I do think a lot of experiments have to be made before using this
>strategy, for example: what volatility period is best? Sell short period
>options and buy longer periods (theta factor!)?
>
>Is there someone out there who can tell me more about ODDS?
>Or is able to share hers/his experience with this system?
>
>Thanks!
>
>Regards,
>Onno
>
>
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