Market Measures - September 16, 2019 - Taking Lottery Chances


Manage episode 242220267 series 1436058
By tastytrade, Inc.. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.
Sometimes we want to take a shot in hopes of a large return. Sure it may be fun to imagine winning big on a trade like this, but how have these trade performed over the last 14 years? ###Study * SPY, 45 DTE * 2005 - present * Bought 5 delta calls * Bought 5 delta puts * Recorded average cost per dollar invested (edge to premium seller) * Recorded odds of receiving at least a 2x, 5x, 10x return on option We find that in any environment, both long shot puts and calls lost money to the tune of 30-60¢ per dollar invested. With a win rate of less than 5%, taking these long shot bets can be more costly than you first think.

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