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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe -- Ignore unavailable to you. Want to Upgrade?

To: tyc:> who wrote (779)	2/24/2003 7:04:38 PM
From: Dominick	Read Replies (2) \| Respond to of 1064

Doesn't the 50% volatility result indicate what volatility of percentage price changes to expect ? That 50% number is only important when you compare it to its past. If you selected a 50 dma over a 1 year period and it had a max of 110% and a min of 48%, what what would that 50% number tell you? It's near its lows for the year so you could reasonably expect it to stay the same or rise. So your strategy would be based on that. Now I'll wait for Dan to fire a burst in my fuselage. :) Dominick

To: tyc:> who wrote (779)	2/25/2003 1:36:21 AM
From: Dan Duchardt	Respond to of 1064

This may not be a very specific reply to your questions, but to go a bit further from the previous messages let's throw in an additional parameter, the trend. I have argued that volatility is independent of underlying trend, because that is what the math tells us. However, trend is a very important component of estimating future price. If we knew that trend would continue, or how it would change, and we knew future volatility we could do a good job of predicting that future price would fall within a range determined by the underlying slope and a volatility envelope. I think those calculators Dom refers to incorporate an "expected rate of return" for doing future price predictions. The volatility determines the width of the range of expected price around the trend center, but that width could be much narrower than a 2SD BB envelope.