Deciphering where a publicly traded security may move to next is a deceptively difficult exercise. Especially when it comes to options trading, it’s not enough to have conviction regarding directional movement. Instead, you’ve got to accurately predict the magnitude of the price action, along with the time it would take to materialize.
Subsequently, options traders quickly find out that forecasting stock prices represents a vexing three-dimensional problem. Making matters worse, in normal conditions, especially for blue-chip giants like Merck (MRK), the odds that a long position will be profitable over, say, a one-week period, are around 50/50. If we’re splitting hairs, for MRK stock, it’s 51.83%.
