Underpriced options / stocks could be bought for profit
By Hicbd
Wed Aug 24 2022 11:04 am
"Although markets are generally good at estimating the magnitude of a contingent liability, they are often poor at evaluating outcomes probabilistically. Examples include litigations, regulatory actions, or other events that create the perception of going concern risk....Worst of option structures are cheaper because the payout is determined by whichever option performs more poorly from the buyer’s perspective. As long as one of the options expires out-of-the-money, the option buyer will lose the entire premium."
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