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Tuesday, June 24, 2008

Futures Options Series - Option Pricing - Theta or Time Decay ...

Challenge Accounts:

Investing Account Balance:
$210.91
Stock / Futures Trading Balance: $825.61
Online Savings Balance: $32.22

Personal Trading Thoughts: Volatility on downward moves doesn't seem as strong. Easing up on my short bias as we may soon see a rally.

Personal Investing Thoughts: Overall, I'm just watching and waiting. Summer is here, and the market will be weaker. Many years, I turn my DRIP off in the summer, and receive straight cash. But not this summer. We've been in a bear market, and the market is offering bargain prices on many stocks. Therefore, my DRIP will remain on, so that I can accumulate more shares at better prices to DCA ...


Ok. We've gone through the Futures, and had a whole series on Commodity Futures. We discussed why options are valuable. We discussed what is meant by the term "Put" option, and "Call" option. We discussed the five components of pricing with the Black - Scholes model. We discussed the first two components of an options value, in the delta and the gamma. Now, let's turn to the aspect of time, or 'theta'.



In the next video, I will discuss the aspect of volatility and interest rates ...

* * *

Investing Account Balance: $210.91
Stock / Futures Trading Balance: $825.61
Online Savings Balance: $32.22


Total Trades: 4
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $65.50
Average Loss: $79.84
Accuracy Rate: 25%
Average Reward: $179.75
Risk : Reward Ratio: 1 : 2.1
Trading Money Gain / (Loss): Down - ($59.68)

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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