Earlier today, I wrote a call option on my ACV stake. At the time, I was more concerned about getting paid to sell than loosing out on gains. This afternoon, I took a look the odds of exceeding my break-even price at the end of the two weeks. I calculated that if miss out on any increase of beyond 1.89%. First, I grabbed all the closing prices for ACV and loaded them into an SQLite database. Then I counted the total number of two week periods in my dataset:
sqlite> select count(*) ...> from (select * from acv_prices a ...> join acv_prices b ...> on (julianday(b.date) = julianday(a.date) - 14)); 5503
Next I counted the number of those periods in which the closing price increased by 1.89% or more:
sqlite> select count(*) ...> from (select (a.close-b.close)/b.close increase ...> from acv_prices a ...> join acv_prices b ...> on (julianday(b.date) = julianday(a.date) - 14)) ...> where increase > 0.0189; 2088
Therefore, if the past is any indication of the future, there is a 38% (2088/5503) chance my option will be called for a loss.
One of my goals in writing the option was that I would like to sell my Alberto-Culver shares. It's likely that a 1% increase will result in my option being assigned, so I also took a look at the number of fortnights in which the stock increased by that percentage or more. I won't show the code, but it turns out that 2551, or 46% of the periods resulted in greater than 1% increases. And just for kicks, I looked at the odds ACV will loose value over the fortnight, which is 43%.
Overall, the odds for each scenario shakes out like this:
ACV | Option | Odds |
---|---|---|
Down | Expire | 43% |
Up | Expire | 11% |
Up | Excerised for gain | 8% |
Up | Excerised for loss | 38% |
Total | 100% |
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