Search results

Is that a sound strategy? Why don't they suggest buying lottery tickets...provided you buy at least one big winner?

In general what I have noticed is that while the IV does increase semi-consistently prior to earnings, this is mostly a result of the option pricing model factoring in time decay especially with little time to expiration. In other words, while the IV does increase prior to earnings (and you say...

Thanks for your reply sle, would you say that in an underlying move up skew tends to steepen (and the whole surface gets pushed down) while on a down move skew would flatten (with the overall IV surface pushed up)? What I am realizing now is that the usual rule of thumb "on a move up, IV goes...

I agree on the McMillan but there's several other good books that will help you lay a solid foundation for your trading: "Option Volatility and Pricing" - Natenberg "Options, Futures and other Derivatives" - Hull once you have grasped the basics you can move on to: "How to Calculate Option...

What about an overall shift of the whole IV curve? Wouldn't that happen as well? Not only riding the curve (if sticky strike) but also the whole curve (parallel) shifting up in crashes and down in rallies?

What is "beta vol"? Vol normalized by the underlying's beta?

If you think about the IV skew that is displayed usually (not always though) by Individual equities and equity indices: You can see that (usually) the ATM IV is the lowest one for that particular maturity (in that example it would be 60). The question here is what happens when the price of...

Hello, I know there are a lot of very knowledgeable and experienced option traders in the forum so I am hoping someone can help me understand this. What is the prevailing consensus for Volatility Surface dynamics? In other words, when the underlying rises do the options for it behave as...

Thanks for the reply, I am looking for information on Individual Equities and Equity Indices. I seem to have understood that for small price moves it tends to follow a sticky strike kind of shift while for large price movements it's more of a sticky delta (moneyness) move but I am not very clear...

Hi sle, I always appreciate your thoughtful responses in this forum. I have been trying to find resources to get a good handle on IV skew/Term Structure dynamics. Specifically how the IV surface changes especially as it relates to price change. I know it's not something that is consistent but...

But on January 2018 on the day of expiration it will converge with spot and will be settled based on the value indicated by ticker VRO

Impressive. What percentage return is that? (how much did you put in initially)

Based on your experience or what you have seen in the markets, do OMM use variance swaps at all to hedge/control their book's risk or are volatility bets (implied vs realized) their actual source of revenue since bid/ask spreads have been so compressed nowadays?

I have always found it funny with Vega that it measures how much the premium will change when the IV changes, but the IV is actually extracted from the Market Price of the option (using a Black-Scholes type model). So option premium changes because IV changed (but I noticed that IV changed...

I agree, but if you go so far ITM as to make theta almost negligible the price of that option will be high (almost all of it intrinsic) and will partially offset the leverage advantage (considering stock is usually margined at 50%). No free lunch in the markets.

If you are wrong or only partially right you also lose with the passage of time (theta) and if the perception of the market is that the underlying is less likely to reach your target than when you put on the trade (Vega)

The first thing you have to ask yourself is whether you should actually use options for your strategy. It appears that the only parameter you have an opinion on is direction which would make me think that a straight stock purchase would be the adequate instrument to use. When you use options...

That is if we assume Black-Scholes is completely correct (IV across all strikes and all expirations are the same) which we know it's not (skew). In this case the ATM strike for Puts has around a 6% IV and the OTM 245 put has an IV of 9%. The closed-form formula for theta has IV on the numerator...

I was going to reply to this thread and then noticed JackRab said all there is to say about this subject. Read his words, think about them, read them again, print them out, frame them and put them up somewhere where you can read them before you put on a trade based on useless (or at least...

hi Kim, can you explain your concept of a "calendar strangle"? It seems to me that what he is doing is a synthetic long call (long underlying + long put) for the duration that the put covers. I understand a strangle as long call and long put, call strike > put strike (long strangle) or short...