Recent content by enjoytrading

Contingent options can reference two underliers like you described, e.g. a NKY call contingent on JPY lower.

I built the options analysis tools at the link below. It does a lot of what you're requesting in the Stress Testing and Scenario Analysis section of the Backtester. Currently in free beta and I'd appreciate feedback. https://www.getvolatility.com

No problem, hope I was helpful. I used mid-market pricing at EOD for all of my calculations so agree that it might be tough to get filled at those levels. In my experience though if you're patient and can let the order sit for a little bit, you more often than not do get filled at mid-market.

The standard formula for moneyness is strike price divided by underlying price. His trade was $185 strike puts on a $216 underlier, or roughly 85%. I looked for underliers where put spreads were generally trading cheaply on a historical basis using the the methodology described in my blog post...

Sure. I haven't done much research on these other than looking at the put spread screen and pricing / historical success rates in my app. I kept the same ~85% moneyness for your short strike. Obviously these likely have different risk factors, just saying that I think there are other...

My historical data puts the probability of success of this trade 93%, but implied vol on LMT is at a 7-year low. Curious why you're choosing this underlier as you're not really collecting that much premium to make it that attractive. Similar strategies on other stocks in strong uptrends with...

I only have historical implied vol data for MSCI Australia (EWA ETF), but I think it's a good proxy. In August implied vol for highly out of the money puts rose from 28% to 49%. That alone would result in a 3x return on those puts. Combined with the down move, you get to about 5x. I suspect the...

I was talking about the month before / month after, not just AH. 2010, 2011, and 2012 Q3 earnings all reversed >9% pre-earnings moves from the previous month.

I just did a write-up on my blog of what the options market is pricing in for Netflix this week. The bottom line is that expectations for Q3 earnings haven't been this high since 2011, and in the recent occurrences where Netflix had a huge run up in advance of earnings, the post-earnings move...

Variance swaps.

You can use IB's API to do this. It's not hard to get started with their API provided you have a programming background. If you're looking for tools to help you analyze data and find opportunities/algorithms, those are easier to find.

Agreed somewhat. My experience is that the market often misprices vol (vol premiums, fear, supply/demand, etc.) and that looking at historical distributions can often help contextualize what outcomes can be better than implieds. Both have their uses. I ran a similar historical pricer to look at...

I'm looking at every possible historical occurrence of three month rolling realized moves on XBI and comparing that to the credit I'd be receiving on the straddles. That's why the trade count is so high. This shows how a $13 straddle would have performed in the past. There were only moves in...

3m biotech straddles (XBI at-the-money) are so expensive that selling them at current pricing would have been profitable 93% of the time going back to 2006 on a hold to maturity basis. I haven't seen a historical Sharpe ratio this high on a sold index straddle in a while. What do you guys think...