Do we need a new greek?

[destriero]

Avg vol-change with n-change in spot?

Ok, so you're pricing index and an ATM call and the index moves 0.5%. Your strike vol rises from 13 to 13.3. What was the driver of PNL? The deltas or the skew via moneyness? What if you're looking at the series that has CPI or Fed coverage? Apple earnings? Large SN earnings absolutely impacts index vols. What's the value of that vol as your gamma has dropped (corollary)? What term are you modeling? Sht has five expirations/week.

What you're doing is a complete waste of time.

 

[wxytrader]

lol this? You're serious? I don't even think you believe what you wrote and sure AF you're not doing this.

Just stop. Understand that you don't know anything and just short vol with a directional-bias. At least your hit rate will improve.

Sure I do. I can calculate the standard deviation by using the avg price movement of a stock in the last x days using crude math.

This is the typical way to calculate SD which imo is flawed.

SD=SQRT(DTE/252)*(IV*Price)

Why? Because you are using the sqrt of 252 when all that really matters is the price changes relative to DTE...otherwise you are skewing the results with irrelevant data.

The crude method and probably the way SD was done before the math people intervened and messed it all up was:

Average daily range for x + price

This is more accurate imo because you are not using IV to determine what price might be able to move to based on year long stats...you are using actual stats in the previous x days to expiry.

IWM Aug11 199 call

Crude math
1SD up $196.90
2SD up $199.64
3SD up $202.37
1SD down $191.44
2SD down $188.70
3SD down $185.97

Sqrt method
1SD up $198.94
2SD up $203.70
3SD up $208.47
1SD down $189.40
2SD down $184.64
3SD down $179.87


I'm sure if you compare the two you will see the crude method will be more telling of the actual price movements. Incidentally, this reveals how option SD and pricing is skewed toward the extremes of price moves rather than the actual price moves.

 

[wxytrader]

Avg vol-change with n-change in spot?

Ok, so you're pricing index and an ATM call and the index moves 0.5%. Your strike vol rises from 13 to 13.3. What was the driver of PNL? The deltas or the skew via moneyness? What if you're looking at the series that has CPI or Fed coverage? Apple earnings? Large SN earnings absolutely impacts index vols. What's the value of that vol as your gamma has dropped (corollary)? What term are you modeling? Sht has five expirations/week.

What you're doing is a complete waste of time.

No problem. I will find a measure that works for my circumstances. I only trade one stock at a time. I ignore all the noise since using EW theory...typically you can predict what the earnings will be because it has to fulfill its wave requirement. I will be modelling 1-3 dte probably...just need to tweak the IV a get an idea of the expected future price versus just the theoretical. It won't be much different I assume...but if you look at the SD calcs it is significant when you use real data.

 

[piezoe]

Anybody have or know of a way to calculate the future volatility of an option after a change in stock price?

Vega measures the amount price will change with a 1% move of IV.
Delta measures the amount price will change based on a $1 move of the stock price.
Gamma measures the amount delta will change after a $1 move of the stock price.
Theta measures the amount price will decay every day up to expiry.
??? measures the amount IV will change after a $1 move of the stock price?


Can we find the value of future IV using the black Scholes model for future prices, but instead find for future IV?

Using the iterative approach we can use Black Scholes to find the current IV of an option by changing IV until it matches current price...but how to find future IV at a future price?

Ha ha ha, sometimes destriero requires translation since he speaks in "dog track lingo". So here is my translation: "No no no no, and No again."

 

[taowave]

Why are you going thru all of this if your orientation is Direction/Elliot???

Get a decent program that will enable you to input your directional forecast
and generate "optimal" strategies per your chosen metrics...

Why needlessly complicate things?

No problem. I will find a measure that works for my circumstances. I only trade one stock at a time. I ignore all the noise since using EW theory...typically you can predict what the earnings will be because it has to fulfill its wave requirement. I will be modelling 1-3 dte probably...just need to tweak the IV a get an idea of the expected future price versus just the theoretical. It won't be much different I assume...but if you look at the SD calcs it is significant when you use real data.

 

[Windlesham1]

I thought options were a waste of time.

Well options have given me a goodliving for 20 years -each to their own. I cannot imagine the hassle of being directional

 

[wxytrader]

Well options have given me a goodliving for 20 years -each to their own. I cannot imagine the hassle of being directional

Having no direction is a direction! 12 delta calls and puts are routinely touched so you will be ITM and at risk of assignment. How do you manage this risk?

 

[Windlesham1]

Having no direction is a direction! 12 delta calls and puts are routinely touched so you will be ITM and at risk of assignment. How do you manage this risk?

I buy options as well as sell them - hence still here. I don't trade stock options, just the index because I like to make a profit. Good luck with EW by the way, good friend has never really made it work so I salute you.