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Systematic and Automated Option Trading (Collection) by Sergey Izraylevich, Ph.D., Vadim Tsudikman

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chapter 4. Selection of Option Combinations

4.1 Introduction

Consider a situation in which underlying assets intended for future trading are predefined. Option strategies have also been preselected and assigned to each underlying asset. Hence, there is only one problem to solve: How to select the best option combination for each {underlying × strategy} pair.

It was shown in Chapter 1, “General Presentation and Review of Criteria Properties,” that even when the conservative algorithm for creation of option combinations is applied, the best variants have to be selected out of quite a large set (21 variants in the case of AAPL and 15 in the case of YHOO). Obviously, the higher the stock price is, the more option strikes are traded, and the larger ...

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