First set is 5-points wide, starting 70 points from current underlying SPX price of 5460
Some notes & context…
The EVs are $, not %. So, #2 on the 5-wide, offering an EV of .124 is preferable to to #7 on the 20-wide at the "same" EV. Open 4 contracts of the 5-wide to get the same max loss of 20 & the EV is close to .5.
The P(Profit) is the probability of being within the break-even points. I assume a standard normal distribution and use the average of the IV of the 50-delta calls & puts as the volatility. [I know there are more sophisticated methods here, but I prefer the virtue of simplicity and would rather be approximately right across the analytic span than add complexity and be precisely wrong.]
Obviously everyone has their own risk/reward preferences. I am seeking to target positive EV trades with premium earned close to max loss.
Posted by AUDL_franchisee