A novel approach for option trading based on kelly criterion
Intelligent Information and Database Systems: 10th Asian Conference, ACIIDS …, 2018•Springer
An option trading model based on Kelly criterion is proposed in this work. Via longing and
shorting options at different strike prices, various portfolio strategies which lock the losses
and profits in advance can be formed; in other words, we hold a portfolio of options with a
fixed profit and loss distribution. We design and use Kelly criterion applied to the options
trading, in terms of calculating the optimal bidding fraction. In this paper we provide a model
for developing an option trading system for finding the profitable option portfolio with optimal …
shorting options at different strike prices, various portfolio strategies which lock the losses
and profits in advance can be formed; in other words, we hold a portfolio of options with a
fixed profit and loss distribution. We design and use Kelly criterion applied to the options
trading, in terms of calculating the optimal bidding fraction. In this paper we provide a model
for developing an option trading system for finding the profitable option portfolio with optimal …
Abstract
An option trading model based on Kelly criterion is proposed in this work. Via longing and shorting options at different strike prices, various portfolio strategies which lock the losses and profits in advance can be formed; in other words, we hold a portfolio of options with a fixed profit and loss distribution. We design and use Kelly criterion applied to the options trading, in terms of calculating the optimal bidding fraction. In this paper we provide a model for developing an option trading system for finding the profitable option portfolio with optimal bidding fraction. This is a new approach for option trading with position management, and some future directions are provided.
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