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Re: Don Fishback



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On Thu, 10 Aug 2000 13:07:06 -0700, you wrote:

>... A lot of the buying/selling option
>decision depends on your bias in the future direction of the stock/index. I
>do not believe the ODDS system can account for that bias.

Seemingly, most option trading strategies don't do this, because they
are based on _stationary_ option pricing models, like B&S, which
cannot take into account the market _dynamics_.  

> In fact, I'm not
>sure that it's possible to model that kind of stock/index behavior in the
>first place.

But analysis of option price time series shows, that there is a "low
dimensional" mechanism behind the data, which should allow for
modeling the dynamic market trends by identifying typical "patterns",
which are invariant through time, at least to some extend.

> I think that once the trade is on, subsequent follow-up action
>is just as important (i.e take/lock-up profits or repair/unwind a bad
>trade).

This imo is very important to handle "unexpected external
disturbances" coming along, which cannot be represented in any dynamic
market trend model. 

mfg rudolf stricker
| Disclaimer: The views of this user are strictly his own.