Some really smart dudes in the markets ...

[Lsbcal]

and way smarter then me.

Watch this especially if you think you are really a good trader:

Not trying to spoil the fun. But it's food for thought.

 

[ownyourfuture]

As someone who's used options occasionally for over a decade, I appreciate the video.

However, to someone who has zero experience, I think the video
(at least the first part of it relating to buying an Apple option) is slightly misleading.

Options are sold in contracts. Each contract equals 100 shares. In the video, the narrator says you could buy one contract for $10.
Apple was trading at $100 per share & he purchased one call option contract that didn't expire until 1 year later, for $10

That wouldn't even be close to what you'd have to pay in real life.
Buying a call option that's the same price as the shares are trading at the day of the purchase would be referred to as 'at the money'

(If shares were trading under $100, it would be considered 'out of the money'
& if they were trading over $100 it would be considered 'in the money'

I think giving a real life example would be the easiest way to make my point.

Apple closed at $170 today. If you wanted to buy one call option that gave you the right, but not the obligation, to purchase 100 shares for $170 anytime between today & one year later (March 5, 2025) that option would cost you $20.60 per share x 100 = $2060.00 for the 1 contract.

If you decided to go with a shorter duration option, we'll say one with an expiration date of September 2024, the premium you'd pay would be lower
$13.87 per share x 100 = $1387.00 for the contract.

Regards

 

[Route246]

Fascinating stuff. I studied this in graduate school, the MBA I got was focused on something called applied econometrics which was the precursor to so much of what is discussed here. As an engineer who was decent in math and coding I found this specialty to be great merging calculus, differential equations and physics. Back then there were no computers capable of doing what can be done later so things were primitive and I wrote most of my code in assembler and a little bit in FORTRAN. Burton Malkiel was my advisor's mentor. Brings back a lot of good memories for reminiscing.

 

[DrRoy]

At the most ultimate level, everything is physics.

 

[ncbill]

Long Term Capital Management (LTCM) thought they had the right models, too.

LTCM

 

[donheff]

I enjoyed that. Not gonna act on it.

 

[target2019]

and way smarter then me.

Watch this especially if you think you are really a good trader:

[dropped URL}

Not trying to spoil the fun. But it's food for thought.

I watched this last week. It's interesting how the equation became part of options calculation. That is really the topic of the video (my opinion).

It's very interesting, especially when one watches til the end. Definitely beyond my grasp.

The channel is described as, "An element of truth - videos about science, education, and anything else I find interesting." I subscribed.