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Man, this sure sounds like some interesting stuff going on in this thread.
Unfortunately for me I can't quite follow it. THat's OK because I'm a
newbie and newbies aren't required to know these things. So... Don't worry
I'm not asking anyone to hold my hand thru this thread but could someone
recommend a good book/website that will transpose all of this into newbie
style English? or better yet since you guys already know this 'stuff' maybe
you could sell/loan/give me your books :)
I do appreciate it.
Thanks
Chris
At 05:17 PM 7/21/98 -0400, Paul Weston wrote:
>Hi RTers
>
>I have used this method on a number of commodities very successfully.
>
>I write strangles when the following criteria are met:
>1) IV is running "relatively high"
>2) less than 45 days to expiration
>3) when the return on margin exceeds a given % when the option stirkes are
>*at least* 2 std deviations (based on close to close over the last 30 days)
>out. For my given profit targets, I have sometimes been able to go out 3
>or 4 SD's. Those times are an option writer's dream.
>
>Historical options data is difficult to obtain.
>
>However, using something like trade station, you can pick an aribrary date
>and plot upper and lower limits, and then replot every so many trading
>days. Then see how often those lines are violated.
>
>Remember, even if the limits are violated, you may still be able to close
>the position at a profit. Also you can "roll" the position up or down and
>still stay in the trade.
>
>Watching IV's and money management are certainly the keys.
>
>I have a 99% winning percentage in some commodities.
>
>I have had 2 rather spectacular losses - one my own fault and one an "act
>of god".
>
>I was naked a bunch of JY when something strange happened over the weekend
>and the yen opened limit up and the IV skyrocketed. I won't trade the
>currencies other than daytrading now.
>
>Regards,
>Paul Weston, CTA
>
>
>
>Message text written by INTERNET:shazlewood@xxxxxxxxxx
>>> I just finished reading a book by someone called K. Anand containing
>some rudimentary option strategies (backspreads, naked strangles, hedged
>with a long straddle when IV falls, etc.)
>>
>> The news in it was the following: according to the author Implied
>Volatility provides the real range for the market over any given time
>period. Thus you take the at the money IV for let's say the S&P and
>project the market range based on this number. F!
>or example, assume the following:
>>
>> Sept S&P is @ 1200
>> At the Money IV = 15%
>> Days to expiration (August) = 32
>>
>> Expected movement = sqr root (32/365) * 1200 * .15 = 53
>> Expected range at expiration = 1147 to 1253
>>
>> The real news is that, according to Anand, this range has held true
>historically 90% of the time. He therefore recommends strategies that are
>short at 1 sigma based on the at the money IV.
>>
>> Since I have not been able to find a database of at the money IV for the
>S&P, I have not been able to back test the theory. Any comments?
>>
>
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