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IMHO: My advice: Anyone tells you to do x, or y, beware! If it sounds too good to be true or it if is easy, .... beware. If told only good things about a trade, ignore that person forever, as they are exceeding evil or misguided. There is little if any "low hanging fruit". Your brain, is...

My experience with IV mean reversion downward has been fairly reliable. My experience with IV mean reversion upward, not so much, so I have no current trading plans for expectation of a low IV increasing. (My experience in this area is very limited, so you may wish to inquire of some with...

Luis: If you find a profitable answer to that question, please let me know as well! :-) I would think, that if you have skills in directional trading, then coupling that with a low IV for position entry, could be a big plus. I know of no way to predict an increase in IV, other than upcoming...

I believe it "should" be derived from the 30 Day IV in method similar to that of the CBOE VIX white paper. However, for example, currently the VIX is 13.36, yet the IV for SPX from TOS is reported as 14.10%, so the difference implies either time lags with the computations, or my "theory" is...

Zzzz1: You fail to comprehend the question! I could attempt to explain the basis of the question, but your prior responses imply that effort would be in vain as well.

Bob: Thnx again. You seem to read and comprehend my questions. I really appreciate your contributions here.

Thnx Bob. Got one in your pocket? -- I need the equations.

Amend question to be "I need algorithm for quantifying max Risk for DEFINED RISK complex multilegged option position" Note: Infinite is considered undefined! Think of trades possible in an IRA account. No Greeks involved in question or answer. Ie, for a simple vertical, the RISK is the spread...

-> I'm using EOD data.<-- I suspect this will prove problematic. I think it wise to ask yourself the question "How accurate is the Back Test?" Also then consider the "edge or profitability" of a "backtested" option trading strategy. This "accuracy" must be adequate to handle the precision...

This question is not for Traders, but for the very limited subset of folks coding Option backtests or complex option positions. I am looking for an algorithm which works with any arbitrary set of Option strikes, put and/or call mix for the same underlying. Need for single expiration, and...

There are many details that are unclear. Are you back testing option trading strategies that are written by a "USER" (near boundless in form and complexity), or are you limiting to specific canned strategies? Is your backtesting done with only EOD option data, or finer granularity (Trade Data...

No problem!

Below is one method I used in VB, if this helps. ------- Function ImpliedCallVolatility(UnderlyingPrice, ExercisePrice, Time, Interest, Target, Dividend) High = 5 Low = 0 Do While (High - Low) > 0.0001 If CallOption(UnderlyingPrice, ExercisePrice, Time, Interest, (High + Low) / 2, Dividend) >...

If you can trade a bit larger, consider replacing SPY and IWM, with SPX and RUT respectively. No assignment possible, lower commissions (fewer contracts necessary), and if in the US, a small tax break on profits from section 1256 contracts.

Ray: First, regarding the terminology: replace "executed" with "assigned". I think the criteria for higher probability of being assigned agrees with your statements. I also think if you can avoid expiration week, you can probably adequately handle an assignment, by merely picking up another...

You can use VisualBasic in Excel. If you don't want to do that, this may be of use: "http://people.revoledu.com/kardi/tutorial/Excel/Iteration.html"

I am very interested in what you are doing. I have done (am doing) similar, and find it difficult ( a huge amount of work) but very educational. The benefit of the things we learn by these endeavors, will likely outweigh the original goal of the task.

sle: I "THINK" the OP's quest in this thread is to quantify the IV with respect to the IV rank/percentile to use to make decision of placing or sizing a new trade entry. SKEW is likely beyond the scope of what he is currently seeking, and term structure is a slightly different animal. Both...

Since you appear to be going down a path of coding your own Back testing tool, I think it will be in your best longer term interest to study the CBOE VIX White paper and understand it. Then, you may chose NOT to implement its algorithms, but as long as you realize the error you are introducing...

For the Interest rate to supply to BSM, use the proper rate determined by the DTE and the best fit, if you are borrowing for that term. This information may change daily, and is avail from Quandl using QuandlCode "USTREASURY/BILLRATES". Below is snip of last few days: Date 4 Wk Bank Discount...