Search results

Yes. When an option expires, it will have zero time value. So on any given date before expiration, the more time value it has, the faster it will decay. Which is the same as saying that the higher the IV, the faster the time decay.

Great article, thanks. Too bad the author's name is not mentioned - his writing is unusually lucid.

Take a look at the attached one-minute chart of the VIX from that day (each bar represents one minute). There's no conspiracy theory too wild for me to believe, but in this case I think the chart clearly shows an opening data glitch. Nobody watching could possibly have taken it seriously as it...

Bad data - it never got close to 38.

Indigestion: Living Better with Upper Intestinal Problems from Heartburn to Ulcers by Henry D. Janowitz

Sure, absolutely, the more info the better. I guess my point is that volume without IV can be very misleading, because you don't know whether it's buying or selling that's driving the volume. IV gives you a look inside that volume and makes the picture clear.

Much, much, much more interesting to me than volume is looking at the implied volatilities. Far more than volume, IV is what tells you where the buying and selling is. Look at the just-out-of-the-money July 25 calls over the past week: Tuesday July 8 - 64% July 9 - 68% July 10 - 74%...

This is an excellent point about a very widely-held misconception. There seems to be a general assumption out there that all option volume is buyers lifting offers. Of course that's ridiculous. It's like saying "volume was high in IBM today, so IBM must have gone up."

Very tricky to trade, lots of unusual wrinkles to this contract. For starters, the underlying for the VIX options is NOT the cash index, it is the futures - and then not exactly, but for all practical purposes. And there's really nothing that ties the futures to the cash index - no arbitrage -...

To me it's a matter of leveraging your situation to the hilt - custom-tailoring a position to best fit the options contract you're looking at. I'm not suggesting that a ratio spread is always the answer. But if you in fact find back month volatility that's ridiculously low by the historical...

Actually, by buying more back month options and selling fewer front month options, you can get gamma neutral - meaning you would have to adjust your deltas less, not more. Don't mean to keep dogging you here Walt - it's your thread and I sense you want to do it the way you conceived it...

Doing ratios doesn't necessarily increase the risk, it just CHANGES the risk. If you were able to buy back-month volatility at rock-bottom IV, then I would argue that buying extra back-month volatility vastly improves your risk profile. It only increases vega risk, which is your risk of least...

Any time you can buy far back month volatility at historic lows (historically low IV), that's a high-probability play. If you can sell volatility with less time remaining (in a month that is closer to expiration) at a decent IV in order to offset back-month theta risk, so much the better. I...

Yes, the bots are very sophisticated. I was recently trading a very illiquid, far back-month option. The market was 2.70 bid at 4.50. I put in a 3.50 bid - and it was hit INSTANTLY. So obviously the bot was programmed to hit any bid above a certain level - but to not show that level so as to...

I get emails all day long from CME about busted trades - such as the following: "17:00 - 17:05 CT. Trades busted. All trades in 6 C U 8 above 9944 are busted Effective Time: 17:27 Central time" The typical reason a trade is busted on the floor is if it "went through" a broker. For...

You seem to be consistently getting out exactly where you should be getting in. To correct that, you could try scaling in two positions. That is, you buy (for example), then just where you would place your stop, you instead place another buy order. Place your stop for both positions further...

cdowis - what do you see as your edge with this strategy? Is it your choice of spreads, the prices at which you execute them, your management of them - or the structure of the "monkey calendar" itself?

In an out-of-the-way market like yours Cowboy, I wonder if you could spread volatilities. In other words, if you can buy the 120 calls for 18% implied volatility and sell the 121 calls at 19% implied volatility, and get delta neutral by selling the underlying, then try to undo that spread at...

Right, that is exactly correct. That is the only difference between the two models. BS calculates the forward price and does its calculations using that forward price as the underlying. Black does NOT calculate a forward price, and uses whatever price you input as the underlying. That's it...

In this example you're pricing a call that is ten dollars in the money with 1 day remaining. It has no time value, so it should have no theta. One model correctly shows theta of zero, the other shows theta of -10, which is ridiculous, and shows that, indeed, there is a problem here.