I'm switching from excel spreadsheets to option risk graphs;currently the free one from OIC, which I find is quite nice and easy to use.
I'm trying to avoid the unpredictable, which I feel attempting to predict market movement is and to go beyond looking at things as bullish strategies or bearish strategies.
I have as my main goal not losing money. I think that by keeping that in the foreground, I should be able to maximize returns overall.
Sounds sort of stodgy, but my days of standing by the roulette tables with half my chips on double zero are long behind me.
However, no matter how cleverly you plan your strategy, volatility is unpredictable, isn't it? So even though I can come up with some elegant graphs that limit risk and provide massive upside, that can all change very quickly.
But first, when you plot a spread type strategy on the graph, are the results based on future estimation of the option value considering things like theta and volatility, or as I suppose, purely on the underlying's prices vs option strike prices?
And what methods are being used to attempt to control that? I hear about delta neutral methodology, but I'm not sure how generally applicable that is.
Anybody want to contribute their ideas?
Lou
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