In the Odds seminar, he pushes MetaStock to some extent which has a Fishback Odds screen that can be included if requested... It does help determine some stocks to look at, primarily by volatility skews...etc...
Yeah, I have MS and have looked at the Fishback expert. It's exactly as you say; it essentially looks for stocks whose volatility is historically at some level, then recently has risen or fallen a significant distance from that level. (It simply looks to see if recent volatility is less than 1/2 or greater than 2 times the moving average of the volatility over the last... year or so. My numbers may not be exact, but that's the idea.)
The thought there is that if volatility now is low but historically high, buy a straddle since they'll be cheap and volatility is more "likely" to re-rise to high levels, increasing the premiums (for a profit for you). Likewise on the flip side; but in this case the strategy would be his credit spread strategy.
But... this is a good start, but not quite 100%. Even if I say I have a 90% chance of making $100, but a 10% chance of LOSING $1000, it's a losing trade (in the long run). (0.90 * 100) - (0.10 * 1000) = -$10. Plus commissions.
Not to mention that he's screening stocks based on volatility anomolies, but the ODDS system uses this anomolous volatility to base its percentage chances of winning. (Or should I use the "long term" historical volatility for that perhaps?) I guess that's why this is still an art and not a science. =)
Anyway, thanks for letting me vent.
Anyone reading this, please let us know how you are trading this system! |
