{"product_id":"v16-c12-093opt-pdf","title":"V.16:12 (563-567): Using Normal Distribution For Writing Options by Mark Vakkur, MD","description":"How can you go about selecting the best strike price for writing an option?\u003cbr\u003e\u003cbr\u003ePerhaps no branch of knowledge\nhas been as abused or misunderstood\nas statistics. Yet, without\nsome grounding in basic\nstatistical concepts, our ability\nto trade profitably is limited.\nTrading does not require a doctorate\nin mathematics, but mastering\nsome basic fundamentals\nshould help stack the odds\nin our favor. This is particularly\nhelpful in developing an options trading strategy.\u003cbr\u003e\u003cbr\u003eMany trading software packages automatically generate\nstatistics on any tradable or indicator; often included are\nmean, median, and standard deviation. Although most people\nunderstand that a standard deviation is a measure of how\nvolatile an asset is, beyond that, their understanding is fuzzy. Yet a wealth of information is buried in that number.\u003cbr\u003e\u003cbr\u003eNORMAL DISTRIBUTION\u003cbr\u003e\u003cbr\u003eTo understand the standard deviation, you must first have\nsome grasp of what the normal distribution is. Although\nentire academic careers have been devoted to arguing whether\nthe market is random, if you were to graph the percentage\nchange in the stock market over any period and then graph the\nfrequency of each percentage change by interval as a histo-gram,\nyou would get a bell curve. This bell curve conforms\nclosely to what one would predict mathematically if the\nmarket were a random process with a slight upward bias.\u003cbr\u003e\u003cbr\u003eFor example, if you were to measure the four-week percentage\nchange in the Standard \u0026amp; Poors 100 index (OEX) for\nall rolling four-week periods (close of the last trading day of\nthe week through the close of the last trading day of the next\nweek) from October 1976 through December 1995, you\nwould get a distribution with a mean of 0.7% and a standard\ndeviation of 3.9%.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52133842026865,"sku":"\\V16\\C12\\093OPT.PDF","price":3.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_ab76e789-db95-489b-9f9f-38ebe2f9f24a.jpg?v=1739653947","url":"https:\/\/shop.traders.com\/products\/v16-c12-093opt-pdf","provider":"Stocks \u0026 Commodities","version":"1.0","type":"link"}