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Henry, Thanks for posting that article. Does active trader make all their articles available on the web like that or do you have to subscribe?
Jasonhuuuchan1 <henry_chau@xxxxxxxxxxxxxxx> wrote:
Hi guys for the useful links about option / volatilityI find this link an interesting reading http://www.ivolatility.com/news/Putting_volatility_to_work.pdfDoes anyone trade the ASX-50 options know how w can get Implied Vol.(IV) current anf historic for the ASX-50 options ?It seems that u need both HV and IV to help with option strategyAnyone recommend any useful book to trade option in ASx-50 ?thanks againcheersHenry--- In amibroker@xxxxxxxxxxxxxxx, "Steve Almond" <steve2@xxxx> wrote:> Bundy,> > Thanks for the explanation. I am reasonably familiar with the concept and importance of volatility in options trading. What I was more interested in was the specific interpretation of the volatility
curves you wrote in AFL.> For instance, looking at the attached chart of DIA, does the interesting looking crossover of the curves around 3/12/04 tell you something important?> > Steve> > > > > > ----- Original Message ----- > From: "Arthur Sawilejskij" <arthur@xxxx>> To: <amibroker@xxxxxxxxxxxxxxx>> Sent: Friday, April 02, 2004 12:30 AM> Subject: 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@xxxx>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 BUG REPORTS to
bugs@xxxx> > Send SUGGESTIONS to suggest@xxxx> > -----------------------------------------> > Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx > > (Web page: http://groups.yahoo.com/group/amiquote/messages/)> > --------------------------------------------> > Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html > > Yahoo! Groups Links> > > > > > > > > > > > > >Send BUG REPORTS to bugs@xxxxxxxxxxxxxSend SUGGESTIONS to suggest@xxxxxxxxxxxxx-----------------------------------------Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx (Web page: <A
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