No problem.
So what's the play here? Short it? Bear call spread? Bear put spread? Long puts? Some vols thing? Parity? If I read the Option volatility and pricing can I get an invite?
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Backtest results with neutral options strategies on stocks with highest implied Vola ?
- Thread starter TrAndy2022
- Start date
No problem.
So what's the play here? Short it? Bear call spread? Bear put spread? Long puts? Some vols thing? Parity? If I read the Option volatility and pricing can I get an invite?
I'm doing the same, ie specializing in stocks with High ATM IV options. Just finished the tests/research etc, and beginning to apply in practice. Yes, 30+% per month is indeed possible.
I don't have long term test results, but I know it works, so no need to waste more time in lengthy tests, since getting historic options data for backtesting is also very costly.
My advice: just do it, and later, when you from it got somewhat rich, order your employees to do the dirty work of backtesting...
IMO, the biggest risk is the "Early Assigment risk" which means your position will be closed, initiated by the counterparty. Applies to all US equity options (as these are American-style).
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You can do it on a spreadsheet.
You must be kidding!
It must be automated and use data of many years to test on, must be fast, not so a$$-slow like a spreadsheet or any interpreted language.
Any particular neutral strategy you prefer ? Iron Condor ? Or Butterly ?I'm doing the same, ie specializing in stocks with High ATM IV options. Just finished the tests/research etc, and beginning to apply in practice. Yes, 30+% per month is indeed possible.
I don't have long term test results, but I know it works, so no need to waste more time in lengthy tests, since getting historic options data for backtesting is also very costly.
My advice: just do it, and later, when you from it got somewhat rich, order your employees to do the dirty work of backtesting...
IMO, the biggest risk is the "Early Assigment risk" which means your position will be closed, initiated by the counterparty. Applies to all US equity options (as these are American-style).
Any other things I should consider based on your testing here ?
How much you would diversify ? How many stocks at a time ?
Could you say something about drawdowns over time from your testing ?
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I'm initially trying to apply it for "EventTrading" (ie. stock has high ATM IV b/c an event is due soon, like FDA decision etc.). For this I'm using a CoveredCall + some LongPuts. Here's a recent example describing it, see also this related posting there.
I also found some other similar constructs, like those posted under this thread, the new constructs begin here.
Regarding diversification: of course the more stocks you can use the better. IMO best is not to risk more than 5 to 10% of AcctValue per stock (meaning 10 to 20 stocks, less with smaller accts); depends much on acct size.
Regarding DD: sorry I haven't tested it yet b/c I think one cannot simply generalize the result if not tested on the whole market. But testing on the whole market is nearly impossible to do for a single trader b/c of so much data to test, and it would be very costly to get that much data from commercial data vendors.
I think only a company with a team of good programmers can afford to do such costly tests.
The tests on some carefully select stocks show me that it works, but one first has to find such good fitting stocks as not every stocks with high IV gives good results.
Of course one has to skip pennystocks etc...
Best is if the stock has weekly options.
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You are a smart guy,do the testing yourself...
Take the Orats trial..Put the time in,your questions will be answered
Take the Orats trial..Put the time in,your questions will be answered
Anything is possible,however improbable...
And with that return comes high blowup risk....
Early assignment risk does not equate to your position being closed.
Assignment = same risk,but an opportunity for better return as you have been "granted" an option via assignment..Early assignment could be harmful if there is a dividend>carry ,or really nasty if the stock can not be borrowed/buy in risk.
If you are shorting vol in super high vol names,I would check to see if the stock can be borrowed should you be assigned...But thats just me
And with that return comes high blowup risk....
Early assignment risk does not equate to your position being closed.
Assignment = same risk,but an opportunity for better return as you have been "granted" an option via assignment..Early assignment could be harmful if there is a dividend>carry ,or really nasty if the stock can not be borrowed/buy in risk.
If you are shorting vol in super high vol names,I would check to see if the stock can be borrowed should you be assigned...But thats just me
I'm doing the same, ie specializing in stocks with High ATM IV options. Just finished the tests/research etc, and beginning to apply in practice. Yes, 30+% per month is indeed possible.
I don't have long term test results, but I know it works, so no need to waste more time in lengthy tests, since getting historic options data for backtesting is also very costly.
My advice: just do it, and later, when you from it got somewhat rich, order your employees to do the dirty work of backtesting...
IMO, the biggest risk is the "Early Assigment risk" which means your position will be closed, initiated by the counterparty. Applies to all US equity options (as these are American-style).
According to the PnL chart, the risk is fully contained and limited, since me the trader myself have designed/engineered it to my own liking and max acceptable risk level. So, the MaxPossibleLoss is known in advance. And since this construct looks even much better than a classic standard spread, then there is IMO no blowup risk possible. Loss is possible, yes, but is moderate & calculated.
Regarding your notes on Early-Assignment etc. I'll respond later.
When you say 30% per month,are you talking about a 100,000 account making 30,000 per month??
You arent talking return on margin..Very different...
Ive been trading for way too long,and I honestly can not remember getting hurt on early assignment..Yes,when a I put on a position on a large div stock,I factor in getting assigned early or not. I stay away from being short calls in hard to borrow stocks,but that just me..
You arent talking return on margin..Very different...
Ive been trading for way too long,and I honestly can not remember getting hurt on early assignment..Yes,when a I put on a position on a large div stock,I factor in getting assigned early or not. I stay away from being short calls in hard to borrow stocks,but that just me..