The Traderszone Network

Published in TZ Latest News 23 June, 2017 by The TZ Newswire Staff

The Kelly criterion and option trading

does the KC calculation have any practical value in calculating optimal position size when trading long option premium ?

When I calculate the KC value using my w-l ratio and profit loss numbers I get .19 Or 20%.
But I would never put this much of a portfolio into one trade buying premium (no matter how good risk management/stops, etc).

What am I missing ? Does it have to do with the number of shares controlled by 1 contract vs the nominal premium ? Thanks