Best Option Strategy for multiple markets

[pannet1]

i am not sure either but when we choose 2 i think the upper band is 1sd away and lower band is 1sd away. so i guess one needs to double up and double down.

wrong. see here

the caveat is price shall be within 2sd 89% of the time. also the volatility is contracting and expanding. so at the entry when volatility is low you get one value but when its expanding we breach the 2sd boundary.

will search for the correct answer to your question.

 

[pannet1]

i think i got ithttp://www.option-trading-guide.com/bollingerbands.html now.

we need to plot the historical maximum expansion movement of the price with a reasonable look back period. so for example you want to see the maximum price moved in a year's time without breaching the upper band. if the price moved beyond the upper band then adjust the sd.

now you know the historically highest sd which Band managed to encampass the price. now use this as your sd value.

as a worst case scenario be ready to adjust the strangle by moving the winning leg closer to the price. you can move it till it becomes a straddle on the current expiry. if the trade is still in loss then roll over to the next expiry. you can even reverse the strangle by moving the winning leg beyond the loosing side.

this is not from my experience but based on optionalpha youtube video. please not am not affiliated to optionalpha, i am just trying to help.

strangle is race between (you) time decay and market (volatility). the trick is keep on buying more time till you beat the volatility.

 

[Subhadip]

https://imgur.com/a/5Dsr3


What I found in Zerodha varsity.

 

[abhi_tyagi]

i think i got ithttp://www.option-trading-guide.com/bollingerbands.html now.

we need to plot the historical maximum expansion movement of the price with a reasonable look back period. so for example you want to see the maximum price moved in a year's time without breaching the upper band. if the price moved beyond the upper band then adjust the sd.

now you know the historically highest sd which Band managed to encampass the price. now use this as your sd value.

as a worst case scenario be ready to adjust the strangle by moving the winning leg closer to the price. you can move it till it becomes a straddle on the current expiry. if the trade is still in loss then roll over to the next expiry. you can even reverse the strangle by moving the winning leg beyond the loosing side.

this is not from my experience but based on optionalpha youtube video. please not am not affiliated to optionalpha, i am just trying to help.

strangle is race between (you) time decay and market (volatility). the trick is keep on buying more time till you beat the volatility.

Thanks pannet for your answer. Have a look at below http://zerodha.com/varsity/chapter/volatility-normal-distribution/

Beautifully explained SD and volatility. While selling strangle it is very important to understand SD and volatility. If strikes are around 2SD then success probility cab be around 95%.

 

[pannet1]

Thanks pannet for your answer. Have a look at below http://zerodha.com/varsity/chapter/volatility-normal-distribution/

Beautifully explained SD and volatility. While selling strangle it is very important to understand SD and volatility. If strikes are around 2SD then success probility cab be around 95%.

that puts all the guess work to end. good job abhi

 

[princy01]

Thanks pannet for your answer. Have a look at below http://zerodha.com/varsity/chapter/volatility-normal-distribution/

Beautifully explained SD and volatility. While selling strangle it is very important to understand SD and volatility. If strikes are around 2SD then success probility cab be around 95%.

Nice details

 

[headstrong007]

This book is an asset for options traders...IMO ..

Option volatility and pricing strategies
by Sheldon Natenberg