How do you value vol?

.sigma said:
I’m just wondering how do YOU analyze vol?
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.sigma, this thread has given a couple of people the chance to show their quant level knowledge on vol and how to model it. If you are academically minded and want to indulge in what's effectively an intellectual pastime, go for it, and model things to the nth degree of accuracy using complex formulae etc. Or you could be pragmatic.

I don't bother with higher level mathematics (although I've studied it at university level), and I don't need to. Sometimes simple is best. I trade for a living. I trade for 6-8 hours a day. I keep an eye an vol, and I use Option Net Explorer to do all the modelling I need. Or a simply back of an envelope calculation to tell me if something is cheap or expensive. Sure, I've written my own Black-Scholes Excel worksheets tailored to my needs, but I rarely use them. Vol is one of those things which is like poker - just when you think you know the game well, you realise there's a whole new level of knowledge that exists, just beyond your reach.
Vol is a complex beast and it's what makes options traders different to say futures traders, or Forex traders. As options traders, we are effectively trading just time and volatility. There's a certain macho-ism around vol, and the level of jargon that an options trader uses regarding vol is often proportional to their ego.

So....keep it simple, don't get too deep into the complexities, and take a practical approach with a keen eye of the relationship between theta and vega of a trade.

Good luck.
 
ffs1001 said:
.sigma, this thread has given a couple of people the chance to show their quant level knowledge on vol and how to model it. If you are academically minded and want to indulge in what's effectively an intellectual pastime, go for it, and model things to the nth degree of accuracy using complex formulae etc. Or you could be pragmatic.

I don't bother with higher level mathematics (although I've studied it at university level), and I don't need to. Sometimes simple is best. I trade for a living. I trade for 6-8 hours a day. I keep an eye an vol, and I use Option Net Explorer to do all the modelling I need. Or a simply back of an envelope calculation to tell me if something is cheap or expensive. Sure, I've written my own Black-Scholes Excel worksheets tailored to my needs, but I rarely use them. Vol is one of those things which is like poker - just when you think you know the game well, you realise there's a whole new level of knowledge that exists, just beyond your reach.
Vol is a complex beast and it's what makes options traders different to say futures traders, or Forex traders. As options traders, we are effectively trading just time and volatility. There's a certain macho-ism around vol, and the level of jargon that an options trader uses regarding vol is often proportional to their ego.

So....keep it simple, don't get too deep into the complexities, and take a practical approach with a keen eye of the relationship between theta and vega of a trade.

Good luck.
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And don't forget my friends delta and gamma.
 
faaaave! soooooo cuuuuute!

short-tailed-field-vole.jpg
 
Scataphagos said:
I don't.

Nearly 100% useless... odds are very high that any consideration of volume will hurt your performance. Volume considerations are worse than just useless.. they are HARMFUL. (I know, that goes against conventional wisdom and is "trading heresy"... true, none-the-less.)
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firstly by “vol” I’m speaking about volatility not volume. Regardless I completely disagree with your post. I use volume as a gauge in a few ways that help me construct trades.
 
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