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No systems issues in 1987. Late reporting, but at the key down moments systems
were working fine. A system breakdown would have been nice as it would put the
program people out of business.
Kent Rollins wrote:
> Wasn't part of the problem during both 29 and 87, the fact that systems
> broke down and people started panic selling? The move to decimals is going
> to have a serious effect on quoted volume.
>
> Kent
>
> -----Original Message-----
> From: The DOCTOR <droex@xxxxxxxxxxxx>
> To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
> Date: Sunday, August 13, 2000 11:59 PM
> Subject: Re: What options to sell?
>
> I don't know about 1929, but 1987 exceeded any statistical measure. Well in
> excess of 5 which describes almost anything possible. The question however
> is
> incorrect in it's nature. When you have events like 1929 or 1987 or major
> moves
> and non continuous pricing... the model you are using such as binomial or a
> B/S
> benchmarks to wrong number. If 1987 was inches of a 5+ move than the
> reference
> point of what would be +/- is invalid. That is why delta hedging in options
> dies after 1987. Events cannot be 5 10 or 20 std. deviation moves .. they
> are
> in fact 2 0r 3 std deviation moves and the perception of expected deviation
> alters. For example if the 108 point move on 10/16 of 1987 wasn't
> "extraordinary than the 500 point move on 10/19 wasn't really as
> "unexpected" of
> an event.
> There used to be a MIT PhD on the board of the CBOE who quoted 10/87 .. if
> you
> benchmarked to implied volatility as a 22 std. deviation event. he then
> went on
> to quote NATO's estimate of a war in Berlin with East German troops and
> tanks
> breaching the Berlin Wall as 5 std. deviation event. So if you used
> traditional
> volatility as benchmark 10/87 was much less likely than nuclear war using
> the
> computer simulation. It is one of the reasons why "traditional" benchmarks
> like
> historic volatility are only still used by former successful option traders.
> Lionel Issen wrote:
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