Hail Mary for volatility surface derivation from 30DTE IV value
- Thread starter stepandfetchit
- Start date
corrected about what? I did not state anything, besides directing you to the vix calculation because you do not seem to understand it.cdcaveman:
Your posts imply you are not reading/understanding my responses. This is not productive for either of us or others here. for example see below from my last response to you:
"In my prior post, I inserted "<-- I expect you agree with this" in two places. Can you confirm that you agreed? This will help to close the gap on communication." <-- your next post ignores my request.
I have my answer for the Thread: NO! No one here is doing this! That is fine, and is what I anticipated.
Your posts imply you are not reading/understanding my responses. This is not productive for either of us or others here. for example see below from my last response to you:
"In my prior post, I inserted "<-- I expect you agree with this" in two places. Can you confirm that you agreed? This will help to close the gap on communication." <-- your next post ignores my request.
I have my answer for the Thread: NO! No one here is doing this! That is fine, and is what I anticipated.
"For SPX options, there is a function, say g(VIX,Price,Strike,DTE,PUT or CALL) that will return an "IV" number within 50% of the true "IV" number given the Strike is in the 20-80 delta range."
***BANGING MY HEAD AGAINST THE TABLE***
Dude....your map g is NOT a function...as newwurldmn explained there are an infinite number of g(VIX) values for each VIX input.
***BANGING MY HEAD AGAINST THE TABLE***
Dude....your map g is NOT a function...as newwurldmn explained there are an infinite number of g(VIX) values for each VIX input.
The idea of analyzing surfaces is to look for distortions which may present one with a trading opportunity (possibly edge?) I did some investigating of surface distortions perhaps 10 years ago and quickly came to the conclusion that any distortion is going to quickly get arbed away, particularly in the broad based indexes. This is not a game that retail guys should even try play in.
I can applaud the academic challenge of the surface analysis you are attempting, but don't expect any monetary reward for the effort.
I can applaud the academic challenge of the surface analysis you are attempting, but don't expect any monetary reward for the effort.
What's the meaning of "an accuracy of better than 50%?"
panzerman:
The approach I am taking filters out the "distortions" you mention. This "filtering" is a goal, and a primary reason for the exercise. An anomaly in a "true Implied Volatility Surface" at a point in time (a bump at a DTE point, for example), will not exist in my derived IV values, which is a prerequisite. This information is to be used in a system of back-testing strategies that do not attempt to capitalize on future binary events.
Sonoma:
"What's the meaning of "an accuracy of better than 50%?" <-- The predicted value of the IV for the specified contract is to be within +/-50% of the actual IV. Example: If the true IV for a -80 Delta PUT strike with N Days to expiration is really 18%, my prediction should produce a value between 9% to 27% worst case (.18*.5 to .18*1.5). {btw: the accuracy seems to be +/-12% currently, with about +/-1% around PUT Deltas in the -.3 to -.4 range; but much more testing is needed to insure this accuracy holds}
others:
I am only answering posts on this thread that appear to be genuine now.
Posts that appear to be intentionally antagonistic, or from failing to read the posts, will not be replied to in order to keep some form of sanity here.
The approach I am taking filters out the "distortions" you mention. This "filtering" is a goal, and a primary reason for the exercise. An anomaly in a "true Implied Volatility Surface" at a point in time (a bump at a DTE point, for example), will not exist in my derived IV values, which is a prerequisite. This information is to be used in a system of back-testing strategies that do not attempt to capitalize on future binary events.
Sonoma:
"What's the meaning of "an accuracy of better than 50%?" <-- The predicted value of the IV for the specified contract is to be within +/-50% of the actual IV. Example: If the true IV for a -80 Delta PUT strike with N Days to expiration is really 18%, my prediction should produce a value between 9% to 27% worst case (.18*.5 to .18*1.5). {btw: the accuracy seems to be +/-12% currently, with about +/-1% around PUT Deltas in the -.3 to -.4 range; but much more testing is needed to insure this accuracy holds}
others:
I am only answering posts on this thread that appear to be genuine now.
Posts that appear to be intentionally antagonistic, or from failing to read the posts, will not be replied to in order to keep some form of sanity here.
What your saying makes sense...
I still don't understand. The actual IV is known at any instant if your bid is lifted. It might not turn out to be the realized IV, but it most certainly is the actual IV at the moment under consideration. How is your range of error around the point estimate helpful?
The distortions (or mispricings if you prefer) is were opportunity lies. Filtering these out is throwing away opportunity. Another way to look at it is that you are filtering out the high frequency noise from the signal. Problem is, there is no noise, it is all signal.