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Gwenn Ael Gautier wrote:
> your average trade is about
> $4.200 in profits.
> Option3: Take immediate profit of $14.000, and wait for next setup to
> happen.
> Option4: Hang on to the position, knowing you have 25% chances the
> intervention does take place and the market shoots up to reduce your
> profits down to $6.000 only. If they don't, you will collect $6.000
> more in profits.
Don't trade futures either <g>.
However, this would be impossible to answer without knowing what the
opportunity cost of Option4 is: in other words, what is the expected result
of Option3 during the extra holding period of 4? For the sake of the
example, let's say you either hold it, or close out and do another trade,
with an expected return of $4200. Then:
Option3: 14000 + 4200 = 18200
Option4: [6000*.25] + [20000*.75] = 16500
Therefore, Option3 would provide a higher expected return, as well as having
the advantage of less risk.
Regards,
A.J.
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