If I went out and bought deep OTM calls and puts option of equal value and let’s say one lot each during the start of the monthly expiry in let’s say 15 to 20 different stocks which I believe is volatile and will move but not sure when and by how much.
So if I have to calculate:
- The probability of breakeven for individual stocks
- The probability of breakeven for overall strategy.
how can I calculate these using historical data if I use last 12 months data.
My idea is within one month the stock will move so that atleast one of the option will increase in value so that I can close one trade with minimum profit or breakeven and hope for reversal on the other side of the trade.
I know it’s not easy as it sounds and probably numbers won’t add up when I execute and wait for the trade to happen but I want to know if there is a way to calculate these probabilities and if any has tested this what was your findings?