Okey....I start to read a Natenberg...Thank for all...I will find all answer for my question.....
How i can to figure out the volatility?
- Thread starter jenek-cowboy
- Start date
I perfectly have understood you.....You trade as Market Maker or specialist...Did this stradegy get an enough money?
it was however quite labor intensive: I send about 1000 quotes each day, I traded DIA-options, so I used the ym-futures too as a hedging vehicle to reduce my margin. You have to be able to short the underlying. However it was not scaleable: doing about 300-350 options each day was the maximum feasible I believe the max I ever did was something like a small 400 options.
I think this good strategy......I will trying to do this on my market. But i think for this case you need an automatic trading system(robot) ...in another way you can't kiiled you demand in extrim market.
If you are getting hit on your bid or ask too much in too short a timespan you just cancel all your prices. I could do this with the touch of one hotkey. (I had several others programmed to quickly adapt the price/ammount of bid or offer) It often happened so I did this three or four times a day.
some good stuff here....in simplier terms you an use an option pricing model to solve for price by using a volatility forecast as an input, or use current prices to solve for implied volatility...
To me the question you have to ask yourself is if you can forecast volatility better than the competition....while I can trade price because I'm simply trying to jump on the back of the competition and not forecast things, I don't see how I can possibly expect to forecast volatility better in head to head competition with institutional quants...hence I don't trade options.
To me, knowing your place on the food chain is the biggest hurdle with trading when you are starting out.
Little fish in the ocean don't survive and prosper by trying to eat sharks.
To me the question you have to ask yourself is if you can forecast volatility better than the competition....while I can trade price because I'm simply trying to jump on the back of the competition and not forecast things, I don't see how I can possibly expect to forecast volatility better in head to head competition with institutional quants...hence I don't trade options.
To me, knowing your place on the food chain is the biggest hurdle with trading when you are starting out.
Little fish in the ocean don't survive and prosper by trying to eat sharks.
I think your last remark is very true, I personally too think I have no value to add in predicting future value so I allmost don't use options anymore; excpetions to this rule is when I have a clear directional view and don't want to risk to much and want to use some leverage, but these are expectoins.
My real value was in making a market and trading relative pricing in series of the same month while hedging, I didn't really needed any clear view on vol for that, just be aware of the ebb and flow of the options and adjust my pricing accordingly. As I started to have cancellation costs of over 1000 USD a day, my profit-centre dissipeared from one day to another. I now trade intraday forex euro mainly, with some added eurostoxx and ym trades. It took me a long while to find something new ...
My real value was in making a market and trading relative pricing in series of the same month while hedging, I didn't really needed any clear view on vol for that, just be aware of the ebb and flow of the options and adjust my pricing accordingly. As I started to have cancellation costs of over 1000 USD a day, my profit-centre dissipeared from one day to another. I now trade intraday forex euro mainly, with some added eurostoxx and ym trades. It took me a long while to find something new ...
In an out-of-the-way market like yours Cowboy, I wonder if you could spread volatilities.
In other words, if you can buy the 120 calls for 18% implied volatility and sell the 121 calls at 19% implied volatility, and get delta neutral by selling the underlying, then try to undo that spread at even volatilities, you would make money.
In this case, you don't care about actual volatility of the underlying. You are simply trying to buy options cheap, sell them expensive, then undo the spread when they come back into line.
This is a somewhat sophisticated game but very profitable and very low-risk if such opportunities are available. What exactly is it that you are trading? Is it options on equities or futures? Maybe if you could post some detailed settlement (end of day) info it would be possible to identify opportunities.
In other words, if you can buy the 120 calls for 18% implied volatility and sell the 121 calls at 19% implied volatility, and get delta neutral by selling the underlying, then try to undo that spread at even volatilities, you would make money.
In this case, you don't care about actual volatility of the underlying. You are simply trying to buy options cheap, sell them expensive, then undo the spread when they come back into line.
This is a somewhat sophisticated game but very profitable and very low-risk if such opportunities are available. What exactly is it that you are trading? Is it options on equities or futures? Maybe if you could post some detailed settlement (end of day) info it would be possible to identify opportunities.
hey would you mind expanding on that example further? im a bit new to options, but wouldnt you be up there a net seller of vol (calls) so you have to buy the underlying to delta hedge?
also on the side, why is the imp vol of a strangle the average of the two vols (of the call and put) ?