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PureBytes Links
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I like this site a lot for both HV and IV
...
<A
href="">http://www.ivolatility.com/options.j?ticker=frx&R=1&x=29&y=11
Pls keep in mind, there may be situations where the
historic volatility is very low while implied volatiliy is high.... Example
Copper Futures....HV is low but option volatility is very high....a sign of
explosive move soon.
Ideally you wanna look for situations where a
stock's historic volatility AND options implied are near 52 week lows for at the
money straddle purchases.
example:
<A
href="">http://www.ivolatility.com/options.j?ticker=ctx&R=1&x=14&y=10
CTX HV and Iv near 52 week low...Ideal setup for a
big move with a straddle.
Cheers,Padhu
PS: If you are new to this I would suggest buying
all books written by Larry Mcmillan...Just OUTSTANDING
Sorry if this is off topic
folks -AB
<BLOCKQUOTE dir=ltr
>
----- Original Message -----
<DIV
>From:
dingo
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Thursday, April 01, 2004 7:26
PM
Subject: RE: [amibroker] Re : volatility
indicators to help with option trading
<FONT face=Arial
color=#0000ff size=2>Got any references on where I can learn more (especially
how to determine "undervalue" and volitility)?
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>TIA,
<FONT face=Arial
color=#0000ff size=2>
<FONT face=Arial
color=#0000ff size=2>d
From: Arthur Sawilejskij
[mailto:arthur@xxxxxxxxxxxxxxx] Sent: Thursday, April 01, 2004
6:31 PMTo: <A
href="">amibroker@xxxxxxxxxxxxxxxSubject:
Re: [amibroker] Re : volatility indicators to help with option
trading
Options trading can be risky and volatile - but if you get a
handle on it - the returns and lifestyle are terrific.Option
pricing and profitability is based on the implied volatility - generally
in line with the short term volatility of the stock - but subject to
short term fluctuations in implied volatility and price - meaning that
at times options are overpriced or underpriced in relation to their
implied volatility and short and long term historical
volatilities.While at any time during their term options may be
overpriced or underpriced - over the life of the option it will move
towards it's fair value.So, setting aside directional considerations
for the moment - if you buy an underpriced option - you can expect it to
appreciate naturally with the passage of time (ignore time decay
effects).Also, the short term historical volatility of a stock tends
to oscillate or move or meander around it's long term historical
volatility levels.So, the ideal setup is to buy undervalued options
whose short term historical volatility is below the long term historical
volatility level.The natural tendency of volatility and implied
volatility to revert to the mean works in your favor - considerably
compounding any directional benefit you get from the highly leveraged
trade.If the options were overpriced and/or the short term
historical volatility was greater than the long term historical
volatility - the trade may not be favorable for buying a call, for
example, but you could take advantage of the pricing disparity by
selling puts instead - so that any probably subsequent drop in
volatility would directly benefit your sold position.The converse -
if you had of bought the calls in such an unfavorable environment - and
price of the stabilized or only increased moderately and volatility came
off - you would be facing a loss, notwithstanding that you had the
direction right.Volatility is the most important consideration in
options trading - and in the usa - with higher liquidity and greater
volatility - you don't even have to trade direction - you just trade
volatility - generally in spreads or combinations or adopt a delta
neutral strategy.Bundy:>Could you explain how you use
these volatility curves? What sort of >pattern/crossing would tempt
you to buy an option, for
example?>>Thanks,>>Steve>----- Original
Message ----->From: <mailto:arthur@xxxxxxxxxxxxxxx>Arthur
Sawilejskij>To:
<mailto:amibroker@xxxxxxxxxxxxxxx>amibroker@xxxxxxxxxxxxxxx>Sent:
Thursday, April 01, 2004 1:46 PM>Subject: Re: [amibroker] Re :
volatility indicators to help with option
>trading>>>> >Hi, I am currently trade
option> >I am using the following volatility comparing short term
and long> >term volality to time when to buy and sell
options.> >> >pds1=30;//Set your time period>
>pds2=200;//Set your time period> >Graph0 =
StDev(log(C/Ref(C,-1)),pds1)*sqrt(365)*100;> >Graph1 =
StDev(log(C/Ref(C,-1)),pds2)*sqrt(365)*100;> >> >Does
anyone has better indicator that they use to compare short/long>
>term volatility?> >> >Cheers> >>
>Henry>>I trade options in Australia as
well.>>I use the following for the
volatility>>>>>>GraphXSpace=10;>>Plot(StDev(log(C/Ref(C,-1)),20)
* sqrt(260)*100, "20 days",>colorRed,
styleThick);>>Plot(StDev(log(C/Ref(C,-1)),30) * sqrt(260)*100,
"30 days", >colorBrightGreen,
styleThick);>>>Plot(StDev(log(C/Ref(C,-1)),90) *
sqrt(260)*100, "90 days",>colorYellow,
styleThick);>>>>I use 20 and 30 days to compare
short term as my option trades are usually >in options that have 4 to
6 weeks till expiry - 20 to 30 days.>>I compare that to the 90
- which is what you want for HV.>>One further point - we have
260 trading days in the year - hence my 260 >compared to your 365
days.>>I think you will find if you use my figures you will
get HV measures that >accord with the official ones you get from the
ASX - the HV values you >calculate would be way off and not much help
in working out if your >shares/options are overvalued,
etc.>>Been using the setup successfully for ages - great help
for option trading >and keeps me out of trades where volatility
shifts might kill the
trade.>>Bundy>>>>>>>>>>Send
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