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On 18 Aug 2004 13:56:58 -0000, you said:
>
> Hi Ray:
> If I can determine the number of units to trade for stock based on
> the formula, but how can I determine the number of units to trade for
> this stock's option? Do you have any suggestion please?
> Thank you
> Eric
Hi Eric:
The safest way to go is to use the delta of the option as a proxy for
the stock. In other words, let's say that after the optimal f exercise,
you determined that you could buy 10 shares. If the delta of the option
is .33, then 30 options (10/.33)would be appropriate.
There is a potential problem however. Since buying options is a 100%
risk of invested capital, you must make sure that the total potential
loss conforms with your comfort level.
Ray
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