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John,
Your premise assumes prices are randomly
distributed and we all know that is not true. You can do this analysis but don't
fool yourself with the results.
Jim
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
jvc689@xxxxxxx
To: <A title=Realtraders@xxxxxxxxxxxxxxx
href="">Realtraders@xxxxxxxxxxxxxxx
Cc: <A title=MedianLine@xxxxxxxxxxxxxxx
href="">MedianLine@xxxxxxxxxxxxxxx
Sent: Tuesday, November 04, 2003 6:04
PM
Subject: [RT] Neutral Position
Spreads
I am throwing myself into this to see if there is a
mechanical way to dodetermine the best strike prices to use to sell a Put
and sell a Callagainst a current price.From statistical
definitions, it can be stated that:1. If option prices [selling a put
and a call] are one standard deviationfrom the current price, then there
is a 32% chance the strike price willbe hit.2. If option prices
are two standard deviations from the current price,then there is only a 5%
to 10% chance the strike price will be hit.3. If option prices are
three standard deviations from the current price,then there is only a 0.3%
chance the strike price will be hit.I am rusty on my statistics...so
any help in doing the calculations wouldbe appreciated. Hopefully, one
based on an example...let's say the closingprice of ECZ03 or
1.1482.Sincerely,JohnDear
Dale,I know how you feel...but we are at an awkward spot. I will send
you achart. Today was a 0.5 or 50% retracement of the slide and we hit
thewarning line today. I printed the chart and we need a 0.618 or 61.8
%retracement past the warning line to hit 1.1521
approximately.Let's talk and make the decision in the AM.Greed
is good but also can turn a breakeven into a
loser.Sincerely,John> john>> i am
feeling a little bit of greed coming on and i think we should> cancel
the 109 option buy back and go fo a win ? the market has> dropped
400pts since ive been in and im down a couple hundred bucks i> think
for what we have been through a small move up here turns a>
profit>>>> daleTo
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