IT’S JUST MATH…words spoken by a methodical disciplined option trader that evaluates each possible play objectively.
The inability to eliminate opinion, bias, and emotion is the major downfall for investors.
Each and every trade should be selected based on simple criteria:
1) Cost/Risk
2) Risk to Reward
3) Trade Break Even Level
4) Probability
Stock traders have a 50/50 chance of a stock going up or down.
The smart guys who developed the Nobel Prize winning option pricing model changed the world. Each and every option strategy can now be graded by the mathematical probability of success.
The functions of time and volatility are components in the option premium. A basic options calculator does wonders in making it about the math, and not opinion.
Here is a great probability tool courtesy of investexcel.net/: Option Probability Calculator
