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On Jun 11, 7:21am, THE DOCTOR wrote:
> 2. A lot of people, IMHO, like to make the case that it is nearly IMPOSSIBLE, to
> make money from the longside...generally to justify some idea or product. IN FACT
> ONCE YOU UNDERSTAND OPTIONS AND OPTION PRICING you come to understand that what
> the pricing model does(for a given volatility)is to create a price at which the
> buyer and the seller would both have identical risk/reward properties.
"at a given volatility ...". If the market overprices the implied
volatility above the actual (on average), then isn't it reasonable
to assume that the sellers will on average win more than they lose?
In ad hoc studies that I've done on implied versus actual, using
VIX as the implied for OEX options, it always seemed to me that
options were priced a bit above actual, on average. Hence, it
seemed to me, that the seller has an edge.
--
| Gary Funck, Intrepid Technology, gary@xxxxxxxxxxxx, (650) 964-8135
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