By Department of the Marine Crops Pentagon

Handbook for upkeep, meeting, maintenance and targeted instruments record for the M16A2 Rifle.

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OVERWRITING WITH NEAR-DATED OPTIONS IS BEST Near-dated options have the highest theta, so an investor earns the greatest carry from call overwriting with short-dated options. It is possible to overwrite with 12 one-month options in a year, as opposed to four three-month options or one 12-month option. While overwriting with the shortest maturity possible has the highest returns on average, the strategy does have potentially higher risk. If a market rises one month, then retreats back to its original value by the end of the quarter, a one-month call overwriting strategy will have suffered a loss on the first call sold but a three-month overwriting strategy will not have had a call expire ITM.

3 Volatility, Variance and Gamma Swaps. 2: Variance Is the Key, Not Volatility 51 This can also be seen from Figure 29 Profile of a Delta-Hedged Option in the previous section (page 46), as the additional profit from the move from 1% to 2% is three times the profit from 0% to 1% (for a total profit four times the profit for a 1% move). VOL SHOULD BE CONSIDERED A DERIVATIVE OF VAR The three examples above show why variance is the natural measure for deviation. Volatility, the square root of variance, should be considered a derivative of variance rather than a pure measure of deviation.

4: Call Overwriting 21 at a period of time where the SX5E had a positive return shows that for one-month options a strike between 103%-104% is best (see Figure 10 above). Typically call overwriting with c25% delta call options is best For three-month options, the optimal strike is a higher 107%-108%, but the outperformance is approximately half as good as for one-month options. These optimal strikes for overwriting could be seen to be arguably high, as recently there have been instances of severe declines (TMT bubble bursting, Lehman bankruptcy), which were followed by significant price rises afterwards.

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