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Hi Kevin ,
i will try the exploration you mention thids statement of yours:
"You must now make use of the Metastock Optionscope
calculator to ensure that the IV is ALSO currently still low before
progressing further."
is the reason i came up with the iv/hv ratio, optionscope is not a fast tool
you must put everythingle data to get the iv and then compare to the hv
with the oscilator of the ratio you can compare a lot of options at
different strikes at the same time, and spot easily the differences and
even create and expert
Bye
----- Original Message -----
From: "Kevin" <kevin_barry@xxxxxxxxxxxxxx>
To: <Metastockusers@xxxxxxxxxxxxxxx>
Sent: Thursday, April 10, 2003 5:40 AM
Subject: Re: [Metastockusers] Metastock IV??
> Hello Freddie,
>
> It is essential to grasp the difference between the two kinds of
volatility
> that we are talking about here when applied to options trading. Historical
> Volatility is the volatility of the underlying SECURITY over the PAST
week,
> month, year, whatever, whereas Implied Volatility is a GUESS of what the
> volatility of the OPTION might be over the NEXT week, month or year.
> 'Historical' implied volatility is something else again being a history of
> what everybody's guess was over a period of time. Typically, it is the
> average of what the Implied Volatility WAS of the close-to-the-money
> strikes BACK THEN.
>
> When trading volatility, one theory is that a period of low volatility is
> usually followed by a period of high volatility and vice versa. Because
the
> Implied Volatility (of the OPTION) has a big effect on the price of the
> Option, the idea is to identify Options having low IV with a view to
buying
> them (because they're 'cheap') expecting IV to rise in the future or
> identifying Options having high IV with a view to selling them, thereby
> collecting a high premium. How you define high/low volatility or
> cheap/expensive options is open to debate.
>
> Therefore, from end-of-day data, you can only plot the Historical
> Volatility of the underlying security. There is no way that you can deduce
> the 'historical' IV from EOD security prices. As I mentioned before, in
> order to do that you must have access to the history of GUESSES. I
> apologise for misleading you regarding the availability of free IV data at
> OptionsXpress. If you have a trading account with them, you get that
> information free. I have attached a sample chart for you showing what IV
> looks like when plotted against HV and the EOD price of the security.
> Perhaps it's an indication of how valuable that information is that it is
> not simply given away.
>
> One of Don Fishback's recommended strategies is to scan for securities
> having very low short-term HV. You can do this with the Metastock
Explorer.
> First, identify securities having the 10 day HV less than 0.5 of the 100
> day HV:
>
> (Std(Log(C/Ref(C,-1)),10) * Sqr(365))
> <0.5*(Std(Log(C/Ref(C,-1)),100) * Sqr(365))
>
> It is traditional to use a calendar year (365 days) for this calculation.
>
> Then calculate the H/L range within which these securities have traded
over
> the past 10 days:
>
> (( HHV(H,10 ) - LLV(L,10))/C) * 100
>
> Now identify those securities whose H/L ranges are within 5% of their
> lowest 10 day trading range over the last year:
>
> LLV( (( HHV(H,10 ) - LLV(L,10))/C) * 100 ,253)
>
> I have used the approximate number of trading days in the year (253) for
> this calculation.
>
> This exploration should produce a list of securities currently trading at
a
> yearly low Historical Volatility and a therefore potential candidates for,
> say, straddle purchases. You must now make use of the Metastock
Optionscope
> calculator to ensure that the IV is ALSO currently still low before
> progressing further.
>
> I sincerely hope that this helps you.
>
> Regards,
> Kevin
>
>
>
>
>
> At 09:47 10/04/2003 +0800, you wrote:
> >
> >Kelvin,
> >
> >I assume option volatility in Metastock is base on EOD although Pro
version
> >has both EOD and RT. However I am not sure if you download intraday data,
> >will the option volatility be computed based on the intraday. I couldn't
> >access the formula of it, otherwise we can examine to see what it does.
By
> >an chance, do you have its formula ?
> >
> >Do you have information on Don Fishback, it seems that you know quite a
> >bit. I could modify the period and percentage in Don's indicator to show
> >different coverage on chart. But I really need to understand how to apply
> >it for option analysis - need application notes. I can do paper trade to
> >evaluate it's truth.
> >
> >I viewed OptionsXpress site, you must open an account in order to access
> >the charting of "Historical IV". Could you demo and capture a screen of
it
> >and post it to me. Btw, are you a member there ?
> >
> >Best Regards
> >Freddie Ng
> >
> >At 06:20 PM 4/9/2003 +0100, you wrote:
> > >I have noticed a few posts recently suggesting that the Metastock
Option
> > >Volatility indicator plots implied volatility. I suggest a little
caution
> > >here. There is not sufficient data in stock end-of-day prices to
calculate
> > >the implied volatility of the options on that stock. In order to do
that,
> > >you would require the option prices for the complete chain. Also, bear
in
> > >mind that options for different strike prices may well have different
> > >implied volatilities. Sometimes the difference is quite marked.
> > >
> > >The Option Volatility indicator can only be based upon some kind of
> > >historical volatility formula. Therefore, if you are comparing this to,
> > >say, the Fishback historical volatility indicator, which is based upon
a
> > >linear regression calculation, you are comparing like to like and it
will
> > >be of no use to you for options trading.
> > >
> > >In order to see 'historical' implied volatility, you will need to
access a
> > >website that has all of that data stored. I think that OptionsXpress
will
> > >let you chart 'historical' IV on particular stocks for free.
> > >
> > >Regards,
> > >Kevin
> >
> >
> >
> >
> >To unsubscribe from this group, send an email to:
> >Metastockusers-unsubscribe@xxxxxxxxxxx
> >
> >
> >
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>
>
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>
>
>
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>
>
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