Add training workflow, datasets, and runbook
This commit is contained in:
@@ -0,0 +1,36 @@
|
||||
Chapter 28: Mathematical Applications 485
|
||||
tively. Some later time, the stock falls to 27 and the trader needs to reevaluate his
|
||||
position. The hedge ratios may have become .42 for the January 30 and .14 for the
|
||||
January 35, indicating that a 3:1 ratio would be neutral (.42/.14 = 3). He now has a
|
||||
bullish position, because his 2:1 ratio is less than the neutral 3:1 ratio. It is not manda
|
||||
tory that the trader act on this information. He may actually be bullish on the stock
|
||||
at this point and decide to remain with his position. The usefulness of the hedge ratio
|
||||
is that it allows him to see that his position is bullish, so he can make a correct judg
|
||||
ment. Without this knowledge, he might still think his position to be neutral, a criti
|
||||
cal mistake if he indeed wants to be neutral. If the trader's ratio is greater than the
|
||||
neutral ratio (2:1 vs. 3:2, for example), he is bearishly positioned.
|
||||
As a final point, it should be noted that the ratio can be adjusted by buying or
|
||||
selling either option.
|
||||
Example: If the stock falls and it is desired that the ratio be increased to 3:1, one
|
||||
might sell more January 35's or might decide to sell out some of his January 30's. A
|
||||
bullish adjustment could be made by buying on either side of the spread in a similar
|
||||
manner. In general, one should adjust by selling time premium or buying intrinsic
|
||||
value. That is, out-of-the-moneys are usually sold and in-the-moneys are usually
|
||||
bought, when adjusting.
|
||||
AIDING IN FOLLOW-UP ACTION
|
||||
The computer can also be an invaluable aid to the strategist in that it can help him
|
||||
monitor his positions. It is generally necessary for the strategist to have some way of
|
||||
inputting his positions into an inventory database and also to have some way of iden
|
||||
tifying different securities that are grouped within the same trading position. Once
|
||||
this has been done, the computer can simultaneously read pricing data ( either real
|
||||
time or closing prices) and the inventory database to generate information concern
|
||||
ing the current status of any position.
|
||||
A current mark to market (profit and loss) statement is of obvious use in that
|
||||
the trader can see how he is doing each day. The computer can also easily generate
|
||||
a set of warning flags that may be of interest to the trader, and could produce a list
|
||||
summarizing possible positions that need action. In most of the strategies that were
|
||||
described, it was shown that the strategist should avoid early assignment if at all pos
|
||||
sible. It is a simple matter for the computer to calculate the remaining time value
|
||||
premium of any short options, and to warn the trader if there is only a small amount
|
||||
of time value premium remaining, perhaps ½ point or less. For similar reasons, the
|
||||
trader may want to have a daily list of positions that are nearing maturity, perhaps
|
||||
Reference in New Issue
Block a user