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Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that s
by ta1234567890 8y ago
Open question: If, for one stock, you could predict tomorrow's closing price today (with 80% accuracy within 2% of the actual price), how would you trade that stock?
- pmalynin 8y agoBuy call / puts (depending on the current price) near the target price, with very close expiry dates. This would maximize your convexity.
- 18nleung 8y agoTry an iron condor - you’ll profit if the price of the underlying asset stays between two points
- deleted 8y ago[deleted]
- hueving 8y agoHow far will it move if it doesn't land within the "80% accuracy"?
- kgwgk 8y agoIt's easy to predict tomorrow's closing price with that accuracy: it will be the same as today's closing price. For a large majority of S&P 500 stocks this prediction will be within 2% of the actual price very often (more than 80% of the days). In aggregate, the hit rate is over 80% as well.
- ta1234567890 8y agoGreat, so how do you use that for a trading strategy?
- hartator 8y agoYou can't. What parent tries to explain is your predictions is no different than regular fluctuations, so you can't use it to get an edge.
- toomuchtodo 8y agoWeekly out of the money options trades with short expires. It’s more gambling than anything else fwiw.
- thisisit 8y agoThe bigger question is - what happens if you get the price 20% wrong? This might look like a winning strategy in a normal and calm market. But, it'll take only one day to wipe out all the gains.
- ta1234567890 8y agoThat's an excellent question. It all depends on the strategy. How would you address that scenario?
- hartator 8y agoMore than 80% of stocks will close within 2% of previous day closing price.