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I think these models are self-defeating, since they stop working when enough people try to exploit them.
by pfdietz 2y ago
I think these models are self-defeating, since they stop working when enough people try to exploit them.
- deleted 2y ago[deleted]
- dragontamer 2y agoThe opposite. We have huge numbers of people 'rocking the boat' trying to create say.... a Gamma Squeeze. The only reason everyone trusts a Gamma Squeeze can happen is because they trust the math in Black Scholes. The may not even understand the math, just trust that the YouTuber who told them about Gamma Squeezes had enough of an understanding ------------ Today's problem IMO, is now a bunch of malicious players who are willing to waste their money are trying to make 'interesting' things happen in the market, almost out of shear boredom. Rather than necessarily trying to find the right prices of various things. Knowing that other groups follow say, Black Scholes, is taken as an opportunity to mess with market makers.
- rubyn00bie 2y agoI used to think charting was bullshit for day and swing trading. Because on paper it sure seems to be, but in reality so many other players are also charting that it becomes useful and somewhat predictive. Largely because you’re all using the same signals. Sure it’s impossible difficult to time things perfectly, but perfect is the enemy of profit. You don’t need to catch the absolute bottom and you don’t need to catch the absolute top. Specific to Black-Sholes the best option plays, when going long, are the ones which have incorrect assumptions about the volatility of the underlying. You can have far outta the money options, absolutely print, with a sufficient spike in the underlying. Even if the strike price will never be met (though you’ll also give that back if you ride them to expiration or let things settle down).