[TheOptionClub.com] Re: Questions about MCatolico's Adjustment PDF

 

I have looked under the file section for this article but could not locate it. I'd love to read this, so could you please post the link.
many thanks

--- In OptionClub@yahoogroups.com, "allistah" <jaime@...> wrote:
>
> Hello all --
>
> I've been studying Michaels PDF in the files section and I came across some text in it (I listed the text in question at the bottom of this post) and have a question about it. The way I read it is that if any price move in ONE DAY happens greater than the 1.5 std.dev. that would trigger an adjustment.
>
> My questions are:
>
> 1) What if the stock moved consistently in the same direction, moving $1.50 per day? At what point would I make the adjustment? Still at the $2.27 (1.5 std.dev) mark?
>
> 2) Once you make an adjustment, do you re-calculate the std.dev. from the current position of the underlying and again wait for those points to get hit to make another adjustment?
>
> Here is the text below that I'm referring to:
> "As a start, let's assume that market noise involves any kind of price move less than 1.5 std.dev. which would include 86.6% of expected price behavior. Following the above example, 1.5 std.dev. equals $2.27 so we are, by fiat, deciding that any one day price move less thatn +/- $2.27 will be ignored. But if price somehow goes beyond this level, we are determining that the move is significant enough to justify making an adjustment to the position."
>
> Thank you,
>
> -Jaime
>

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