High Stakes Market Intelligence for the Serious Investor
Based on my interpretation of the Black-Scholes Derivative Pricing Theory, I have been able to pinpoint publicly traded companies that are vulnerable to huge short term price eruptions of 10% to 50% or more, with volume large enough to satisfy the biggest speculator.
After selecting potential candidates using my derivative analysis, I work in reverse from the numbers to find an identifiable event. Specifically, an algorithm of Black-Scholes Implied Volatility to Historical Volatility is measured against time for overnight gap risk. This tells us how close the stock price is correlating with an identifiable event or basic financial fundamentals.
Option open interest and volume, average daily stock price and the float are considered to determine directional bias and an approximate time frame in which the binary event will occur. Utilizing information purveyors and other investigative methods can determine exactly what events are causing the binary discrepancy. Important news events may include patent approvals, litigation, FDA drug approval, quarterly earnings, contract negotiations, or any future event that could have a major effect on a company’s immediate market value.
The heart of this method relies upon correctly identifying the event behind the derivative model, and then monitoring the competitive intelligence of those events to use as leading indicators for direction and execution.
Abbreviations:
BETM=Bias, Event, Timeframe, and Magnitude
OI=Open Interest
PA=Price Action
IV=Implied Volatility
HV=Historical Volatility
TA=Technical Analysis
BS=Black-Scholes Theory
Free basic option information-- www.ivolatility.com
This BB is for professionals only
Any uncivil behavior will not be tolerated. |
