Lisa, re:Options gobbledegook
On your inquiry regarding the following:
If you believe that the options is mispriced due to the highly persistence of the price movement and anti-persistent volatility, you should figure out why people sometimes make money and sometimes lose. It is the underlying people could not make it right, especially when volatility is high.
On the other hand, if you think the options is fairly priced, it will be an idiot to play with it, no matter what ways people play it.
Look like reverse psychology? Maybe... On the other hand, if the stock's direction and movement are given, then "fair price" for the option is easy, right? Of course, most of us don't know the future, so the argument becomes somewhat silly (as stated).
I believe the author's point is: focus on the stock (and associated psychology), not on whether the option meets some valuation formula.
Sounds fine, but I'll retain the fair-value models nonetheless. <g>
Just a guess,
Alan |
