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In some way this could be an excuse for the banks to cut their dividend without their stock price getting as punished as may have happened if they cut the dividend on their own. Kohl's might be a case in point: Their stock went up on the same day as the dividend cut announcement. Here's why...

Big banks will be required to limit dividend payments at their current level for Q3 and going forward based on a formula using their earnings. The options market took down estimates of dividends that are implied in options prices: Citicorp's down 14%, Wells Fargo's down 8% JPM down 4% and BofA's...

Hi Gowtham ORATS has historical relationships for all US equity options back to 2007 along with many other metrics. We forecast short-term (30 day) and long-term (2 year) slope, which is roughly what you are describing. You can set up an analysis to predict the relationship yourself. Here is a...

I would start by setting up a backtest on stocks that you have liked in the past and observe which options strategies performed best. In our backtester you can put in dates for entries and exits for multiple symbols. You can test things like: Days to expiration 180, 225, 300 Deltas 20, 30, 40...

Regarding market data fees: Stock Exchanges Win Legal Battle With SEC Over Data Fees https://www.wsj.com/articles/court-overturns-sec-decision-to-reject-fee-increases-for-exchanges-data-feeds-11591383268 The decision by the U.S. Court of Appeals for the District of Columbia Circuit appears to...

Atikon That depends on what your comparison is. After developing an error metric, edge (or margin of safety) is dependent on an appropriate normalized error term like standard deviation. You should calculate that for the IV and the comparison volatility. We calculate a confidence level for each...

VolSkewTrader Yes, I should clarify. We create a slope & derivative not to create our smooth market values but to create parameters for comparison to other months in the same security and to other securities. Our smooth market values process starts with a process akin to a cubic spline and then...

We use percentage of a day starting at 95% at the open and 5% at the close. Pricing models generally don't work with 0 DTE.

Great question Ironchef and thanks for the link ajacobson Cboe started as an exchange getting preferential treatment from regulators but have morphed into a holding company with investment and trading solutions. Here's from their annual report. Cboe Global Markets, Inc. is one of the world’s...

We use a binomial tree approach as described in Haug "The Complete Guide to Option Pricing Formulas".

Hi VolSkewTrader Our method is less of a formula and more of a process. Strike Slope is a measure of the amount that implied volatility changes for every increase of 10 call delta points within the intra-month skew. It measures how lopsided the 'smile' or 'smirk' is. The derivative is a measure...

Thanks Dest Getting skew right has taken a large part of my trading life while on the floor and backing traders, and my professional life with ORATS, and a good deal of wealth. Sometimes I wish I had advice like yours 25 years ago.

My firm, ORATS describes the implied volatility surface as a 3-dimensional surface where the independent variables are time to expiration, and option delta and the dependent variable is implied volatility. To illustrate an implied volatility surface, we have developed a 2-dimensional graph that...

I know Henry well and the company too. I also know the Cboe, having traded there for many years. Trade-Alert (TA) has a bunch of proprietary calculations that would take years to replicate. For the Cboe this was a good add to their stable. They could not have recreated what TA does with any...

1. When we took this snapshot of markets there may have been an anomaly because currently the implied dividend is back to near normal. We account for time value and discounts. 2. There can be a trade if you have a different outlook than the options market. However, like I said the overlay is...

Here are today's:

Not rare, we just assume that we roll the call to the next trade.

Smoothing the options surface is a very difficult task. By smoothing the IVs, call and put theoretical values can be compared to market bid-ask quotes to see if the options are under or overpriced. The smoothed IVs produce more consistent greeks by which to manage risk too. By parameterizing the...

Thanks Taowave I ran the test on these symbols as a proxy for the names in the S&P500 since they made up 30% of the weighting: MSFT, AAPL, AMZN, PFE, JNJ, T, GOOG, BRK_B, JPM, V, PG, UNH, INTC, VZ, HD, MA. I did not backtest the indicies nor run the stock portion. What would you like to see...

Thanks qlai - I will add a way to subscribe. Now we have an annoying pop up that you will see once in a while. For the backtest we assumed that we would buy in the short calls if they were in the money. This happened about 12% of the time (the win% being 88%) which is about what you'd expect...