This article was originally published in The Option Strategist Newsletter Volume 2, No. 23 on December 9, 1993.
We often speak of a position as being "statistically attractive". Many strategists who trade hedged positions have a vague idea of what that means, but would be hard pressed to cite specifics. In this issue, we're going to take a little more in-depth look at what, specifically, constitutes a statistical "edge". This will include looking at the way prices are distributed as well as delving further into the meaning and ramifications of volatility skewing. Then, we'll conclude by looking at a strategy that is currently popular in some circles.
