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training_data/relevant/text/03ae37d543c8af5edb960764be68c65d264b8a848b4d0966189d24832373ab70.txt

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+886 Part VI: Measuring and Trading Volatility 
+that is somewhat variable. But, for the purposes of such a projection, it is acceptable 
+to use the current volatility. The results of as many as 9 stock prices might be dis­
+played: every one-half standard deviation from -2 through + 2 (-2.0, -1.5, -1.0, 
+-0.5, 0, 0.5, 1.0, 1.5, 2.0). 
+Example: XYZ is at 60 and has a volatility of 35%. A distribution of stock prices 7 
+days into the future would be determined using the equation: 
+Future Price = Current Price x eav-ft 
+where 
+a corresponds to the constants in the following table: (-2.0 ... 2.0): 
+# Standard Deviations 
+-2.0 
+- 1.5 
+- 1.0 
+-0.5 
+0 
+0.5 
+1.0 
+1.5 
+2.0 
+Projected Stack Price 
+54.46 
+55.79 
+57.16 
+58.56 
+60.00 
+61.47 
+62.98 
+64.52 
+66.11 
+Again, refer to Chapter 28 on mathematical applications for a more in-depth 
+discussion of this price determination equation. 
+Note that the formula used to project prices has time as one of its components. 
+This means that as we look further out in time, the range of possible stock prices will 
+expand - a necessary and logical component of this analysis. For example, if the 
+prices were being determined 14 days into the future, the range of prices would be 
+from 52.31 to 68.82. That is, XYZ has the same probability of being at 54.46 in 7 days 
+that it has of being at 52.31 in 14 days. At expiration, some 90 days hence, the range 
+would be quite a bit wider still. Do not make the mistake of trying to evaluate the 
+position at the same prices for each time period (7 days, 14 days, 1 rnonth, expiration, 
+etc.). Such an analysis would be wrong. 
+Once the appropriate stock prices have been determined, the following quanti­
+ties would be calculated for each stock price: profit or loss, position delta, position 
+gamma, position theta, and position vega. (Position rho is generally a less important 
+risk measure for stock and futures short-term options.) Armed with this information, 
+the strategist can be prepared to face the future. An important item to note: A model