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Credit-to-BPR Ratio

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The credit-to-BPR ratio is a good way to estimate the risk-to-reward tradeoff for undefined risk option strategies. For 16 Delta strangles this ratio tends to increase with IV, and, since volatility is efficient across instruments, this ratio tends to increase at roughly the same rate regardless of risk profile. Today Tom and Tony discuss this ratio in more detail.

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