Debate strategy lol? Just an observation/comment on the level of sht you talk as a little unemployed kid.

I dunno, correctly pointing out that you have no clue what you're talking about isn't really talking **** imo

Saying "you implemented it at work, therefore you don't know how it works" doesn't point out anything, other than you're trying real hard to be douche.

PS: Time to move out. Get a yob

Glad you enjoy grinding it out 60 hours a week tryina figure out how to squeeze an extra 0.05% yield to make your boss rich while sending half your meager paycheck to uncle Sam. I'm okay with playing golf and skiing every day since I retired nearly a decade ago at 26. Money isn't everything.

Where do you live where you can golf and ski on the same day

I guess the seasons only overlap 3-4 months so my wording wasn't strictly correct. Though I don't have to drive very far for year round golf

Hah. Sounds like you just described your life.

I'm required to put in 40 hours, but I average 52-62 (no overtime). Even 70 on rare occasions. Why? Because, you're right, I do enjoy what I do, and I'm getting paid, and getting my firm and bosses paid as well.

I know you're use to trading penny stocks out of your tiny brokerage account, but 0.05% extra yield on a $200M daily volume is an extra $100k/day.

How mature.

Basically said by every bum I've met in life. Trying telling that your girl (or guy?). I'm also guessing you don't have kids or have plans for reproducing.

You'd think a bond guy would know what yield means

pete, want to expand on why MPT is relevant in this discussion?

To my understanding it assumes that riskier assets have greater returns, rather than proves it.

So puts being +ev would simply invalidate a MPT strategy, but is not impossible according to MPT.

That's our trading volume where I'm involved in. Pretty sad that it's come down to nit-picking words. I'm not in the portfolio area, but 0.05% yield is quite significant on multi billion portfolio.

Anyway, aren't you late skiiing (or is it golf today?). What's today penny stock trade?

Puts on a market correlated underlying asset being +ev would invalidate EMH. Such a put would probably fit nicely into an MPT portfolio.

MPT doesn't claim that markets are efficient, it just provides a framework for building an optimal portfolio.

But it's incorrect to assume both that markets can be efficient and market correlated options can be neutral EV for reasons outlined by MPT. Long beta is always compensated (in EV terms) in an efficient market.

Still not sure I see the relevance of MPT here.

You are taking on volatility risk with options so its not trivial to say that 0ev puts would improve an optimal portfolio.

If you ignore volatility as a risk factor, you don't need MPT to show that if equities have a risk premium than puts must be -ev, this is straightforward from BS

As far as EMH, you are correct that assuming investors are risk averse EMH suggests puts are -ev (again - ignoring volatility as a risk factor; I'm ok doing that since put sellers are collecting the risk premium there). Grim can you confirm if you agree with that statement? However, EMH is just a theory, and even if it is correct, it is only describing a possible, not a necessary state of the world. Therefore it shouldn't necessitate puts being -ev.

Everything describing the universe is "just a theory." Whether people are risk averse (willing to pay up to avoid catastrophic loss, unwilling to insure others against catastrophic loss for no expectation of profit) is a theory. It just happens to be a theory that describes how actual people actually behave in actual real life.

That the earth is roundish is also a "just a theory."

If we can assume the "volatility risk" isn't sufficiently correlated with the optimal portfolio to make the options correlated with the optimal portfolio it is. If all options are 0ev it's easy to find ones with very little "volatility risk"

MPT just explains why the risk premium exists. You're right that if we accept that there's a risk premium we don't need MPT. BS itself doesn't say anything about risk premia.

This isn't correct. Under EMH all risk is priced efficiently and all puts (negatively) correlated with the efficient portfolio will be -ev.

Of course, not sure what your point here is. Are you trying to say EMH is basically truth in all states of the world but 'just a theory' as a technicality, similar to the round earth?

I would however debate your definition of risk averse, that seems to narrow.

Maybe, that doesn't seem obvious.

That's kind of the point, BS uses the Q measure and if volatility is neutral options are basically stock

I may have moved disciplines in my terminology there. Just pointing out that EMH is not necessarily a reflection of the state of the world (I'm sure thats obvious).

Obv EMH doesnt reflect the real world since markets aren't perfectly intelligent. But it's worthwhile to understand how various financial instruments should be priced if risk preferences were well defined and all risks and return distributions were known. If all of that is known there's a single correct price for every financial instrument, which is, not coincidentally, the same price you'd get under EMH.

I'd have to guess Mammoth Lakes in California. They just closed their slopes this week and their golf course has been open for a few months.

I'm not actually a proponent of EMH. There are too many anomalies. I am a proponent of markets being efficient-ish.

However, in real life, actual people overvalue lottery tickets (low cost, high upside) and insurance against catastrophic loss, and people dislike limited upside with huge downside enough for the price to not be 0 ev. This is consistent in markets that have no drift, those that have negative drift and those that have a positive drift. This is simply an empirical observation. The theory behind it really doesn't matter.

I can imagine a world ruled by lizard people in which the opposite were true (I'm unaware of any actual lizard people worlds). I can also imagine a world where option sellers make serious mistakes in their calculations (this actually happens).

We're only worried about risk as it relates to option pricing here. People really enjoy losing their house far less than they like losing $3.

lol, come on be real. Pete lives in his mom's basement, somewhere in back woods Iowa.

Yeah seriously. Unless he lives in a shack or received a large inheritance, you can't afford most parts of CA with a micro penis bank/brokerage account.

whistler bc...... but i wouldn't have thought the golf courses are open when the ski resort is open - technically there may be skiing all year on the glacier but i mean ski season,

in vancouver canada, you can golf and ski half a mile apart for 5 months or more per year. or sun tan at the beach for probably 3 weeks of that time if it's a good ski season..