Setting Strike Price Probability At Expiration by David White
ARTICLE SYNOPSIS ...Stocks & Commodities V. 22:12 (56-59): Setting Strike Price Probability At Expiration by David White
Here's one way you can increase your odds for a short-term play.
Nassim Taleb's exceptional book, Fooled By Randomness, helped me finally gain the proper understanding of the probability of hitting a strike price at expiration: "The statistic that 90% of all option positions lost money is meaningless (i.e., the frequency) if we do not take into account how much money is made on average during the remaining 10%." Let's take a look at what this means.
PRICE AT EXPIRATION
Setting a real-odds n...