697 Index Prudence, 583 PTR. See Price trigger range (PTR) Pure arbitrage, 530 PWPLR. See Probability-weighted profit/loss ratio (PWPLR) Pyramiding: midtrend entry and, 182 rejected signals and, 251 trend-following systems and, 252–253 Quantum Fund, 22 Random error, 628, 679 Random sample, definition of, 608 Random variable, 599 Random Walkers, 29–34 Rate of change, 163 Ratio call write, 532–534 Reaction count, 179–180 Recession, severe, 367. See also Great Recession Regression analysis, 589–595, 675–683 about, 374–375, 589–591 assumptions of, basic, 620 best fit, meaning of, 591–593 dependent variable, determining, 675–676 example, practical, 593 forecast error and, 679–680 independent variables, selecting, 677 least-squares approach, 592–593, 594 practical considerations in applying, 675–683 preforecast period (PFP) price and, 677–678 regression forecast, reliability of, 593–595 simulation, 680–681 step-by-step procedure, sample, 682–683 stepwise regression, 681–682 survey period length and, 678–679 Regression coefficients: computing t-value for, 626 multicollinearity and, 665 sampling distribution of, 621 testing significance of, 620–626 Regression equation, 619–635 analyzing (see Analysis of regression equation) coefficient of determination R 2, 630–633 confidence interval for an individual forecast, 627–629 extrapolation, 630 misspecification and, 679 Production costs, price declines and, 351–352 Profit(s): partial, pulling out, 584 slow systems and, 245, 246 winning trades and, 570–571 Profit/loss matrix, short puts with different strike prices, 514 Profit/loss profile: alternative bearish strategies, three, 548 alternative bullish strategies, three, 547 alternative neutral strategies, two, 549 bear call money spread, 536, 538 bearish “T exas option hedge,” 520 bear put money spread, 539, 542 bull call money spread, 535 bullish “T exas option hedge,” 518 bull put money spread, 541 covered call write, 527 covered put write, 528 definition of, 488 key option trading strategies and, 489–542 key trading strategies and, 489–542 long call (at-the-money), 492, 495 long call (out-of-the-money), 494 long futures, 490 long futures and long call comparisons, 497 long futures and short put comparisons, 514 long put (at-the-money), 504 long put (in-the-money), 507 long put (out-of-the-money), 505 long straddle, 516 option-protected long futures, 521, 522 option-protected short futures, 524, 525 ratio call write, 533 short call (at-the-money), 498 short call (in-the-money), 501 short call (out-of-the-money), 500 short futures, 491 short futures and long put comparisons, 509 short futures and short call comparisons, 503 short put (at-the-money), 510 short put (in-the-money), 513 short put (out-of-the-money), 511 short straddle, 517 synthetic long futures, 529 synthetic short futures, 532 trading strategies and, 488–489 two long calls vs. long futures, 544