Options Jive

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Trade Statistics Convergence

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

This segment of Options Jive discusses how we can reach the theoretical statistics we cite in studies.

In many past studies, we have cited the average P/L. This average P/L represents the theoretical mean for a distribution of trades. To reach the average P/L, we want the distribution of our trades to be as close as possible to the average P/L (theoretical mean).

This means we want to reduce the variance of our trades so most are centered around the average P/L. Based on the Central Limit Theorem, the more we trade, the smaller the variance. Therefore, reaching a performance equivalent to the cited statistics involves increasing the number of trades.

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