Implied Volatility, Greeks

T

Trader101

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Hello to all.

I am a rookie options trader and fairly new to this website. (I find it very enjoyable thus far)

I was introduced to options by a mm of the CBOE. For several reasons (his marriage, retirement, etc.), I am no longer communicating with him.

Currently, I have myself on a three-year trading plan. In other words, at the end of three years I expect to trade options reasonably successfully.

I was wondering if there are any option traders here that trade using implied volatility (or historical,etc.)? Is it a viable way of trading options?

Also, what would you experienced options traders consider a big mistake(s) or misconception(s) new opt. traders make?

Care to share any of your trading experiences?

Wow, didn't know I would ask so much.:eek:

I thank you all in advanced. Happy trading.:)
 
Absolutely you should be focused on implied volatility. If implieds are low (based on historical levels) then you want to be a buyer. If implieds are high (based on historical levels), then you want to be a seller.

There are ways to play the volatility game (straddles, strangles, etc.).

Just remember that just because you are buying implied volatility at low levels, does not mean that you will win with your position. It just means that the odds are with you (and vice versa when selling implied volatility at high levels).
 
Originally posted by Trader101


I was wondering if there are any option traders here that trade using implied volatility (or historical,etc.)? Is it a viable way of trading options?
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for a specific, detail stratergy question ask Arb at NG misc.invest.options
 
Something you want to be careful of though is which historical volatility you compare the implieds to for validation (e.g., whether they're really high or low).

The 100 day HV is typically shown, but I've found that the 30 day HV is usually a better metric against which to compare IV.
 
Verify the outputs of any valuation model you are using, the math is off in most and focus on your baseline of HV, there are better ways to calculate than the standard models. The extremes between the two are obviously the key; and the models you implement will determine whether or not you abandon the concept prematurely.
 
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