You are viewing a single comment's thread from:

RE: What is positive versus negative mathematical expectation in option spread trading?

in Banking and Finance5 years ago

As did you;

If you only trade this rule, it looks like this;
A call credit spread is created by selling SPY April 6th 269 for 0.74 and buying the April 6th 270 call for 0.31 for net credit of 0.33, which times 100 = $33.00 per contract.

The “new” mathematical expectation calculation looks like this;
$33 x 0.79 = $26.07 (win)
$ 67 x 0.21 = $14.07 lose)
So if you trade this credit spread 100 times, you will win $33 79% of the time for a total gain of $26.07 and you will lose 21% of the time, $67 x .21 = $14.07 loss. So if you do the math, this vertical spread trade with a 33% credit requirement to make the trade does have a positive mathematical expectation.

Coin Marketplace

STEEM 0.14
TRX 0.24
JST 0.032
BTC 88444.18
ETH 2199.24
SBD 0.89