my divine commedia to optionality
- Thread starter .sigma
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This market is something else man. Can't do shit with a 12 vix.. its amazing how much non-opportunity the market presents when it doesn't move. Movement is the goal of money. That's why they call it "current"cy and "liquid"ity.. its all in the flow man.
When markets are moving two-sided every week I'll have probably 50 underlyings on my radar for opportunities.. but with a 12 vix I get 5 AT MOST.. its insane man. This is why its essential for an options trader to speculate some capital for earnings season trades to get occurrences up and keep your money flowing. Its something I'm realizing in my 9th year trading.
When markets are moving two-sided every week I'll have probably 50 underlyings on my radar for opportunities.. but with a 12 vix I get 5 AT MOST.. its insane man. This is why its essential for an options trader to speculate some capital for earnings season trades to get occurrences up and keep your money flowing. Its something I'm realizing in my 9th year trading.
I'm constantly astonished how complex trading can be. I'm not going to lie, I've been down lots of wormholes when it comes to options and volatility. Sometimes I need to step back and think.. maybe more complexity isn't a good thing, and the whole keep it simple mantra is the truth.
Options can get so sophisticated and I applaud the expert option traders who know a wealth of knowledge and trade like beasts.. I hope to achieve that type of style in my life sometime.. maybe in another 20 years. But for now I'm trtying to keep it simple.. For example, I watch NO news or TV, I have no idea whats going on in politics and economics (to an extent) for a reason. I shun out the noise and trade price. I look at what the numbers are telling me. Why is IV% at this number? Everyones talking "trade talk" or whatever and I just don't care to flood my mind with nonsense.
Options can get so sophisticated and I applaud the expert option traders who know a wealth of knowledge and trade like beasts.. I hope to achieve that type of style in my life sometime.. maybe in another 20 years. But for now I'm trtying to keep it simple.. For example, I watch NO news or TV, I have no idea whats going on in politics and economics (to an extent) for a reason. I shun out the noise and trade price. I look at what the numbers are telling me. Why is IV% at this number? Everyones talking "trade talk" or whatever and I just don't care to flood my mind with nonsense.
11/11/1912:19am,
Spooz -11.25 early Monday morning. Market is a few points under my initial 3100 spot target. This market is self-cannibalizing itself. 12 VIX is the death of trading. Share-buy-backs account for a large percentage of this bull-run and how many times can a company keep issuing debt at low interest? Who knows, does it even matter? Whats opportunity is there right now?
$SHAK
$VG
$PSA
$RAIL
$ETSY
$TWTR
$ENLC
$ETRN
$HCR
$EQM
The parameter u, lets call the drift rate
or, the expected return
or, the growth rate of the asset.
u = 1/Mt(Sum)Ri
In classical option pricing theory the drift plays almost no role.
Throw a radical over that equation and you got the most elusive and important quantity in the theory of derivatives. Volatility.
So you got this asset oscillating like it always does, naturally. But what is causing spot to transact this way or that? This is the key to the chest where my mind slept. Drift and vol affect spot in different ways. I look at charts to visually see the nature of the underlying. Each underlying is different, and each moves in a unique way. Yet, even though this is true, all of these assets look exactly the same.. you see spot oscillating around some mediocre value area until it drift away from it and establishes a new value area to chug up and down around. Its amazing how theres clarity within the randomness.
Since the market is fractal this can be achieved at many intervals.
I suggest you get familiar with statistics/probability theory/derivative theory etc..
Drift doesn't affect the short-term, but its very apparent in the long-term. The logarithm of an asset, oscillating around the mean (expected path) within a confidence interval. Now depending on which alpha level chosen will determine your C.I level. But assuming normality 68% of the time the asset should be around this range. Now we all know normality is far from our markets. So knowing this we adjust and increase our intuition of our surroundings. The market will fuck you and leave you dead. I've seen it happen to people close to me. It always comes down to sizing up. Stay small and increase your number of occurrences.
Spooz -11.25 early Monday morning. Market is a few points under my initial 3100 spot target. This market is self-cannibalizing itself. 12 VIX is the death of trading. Share-buy-backs account for a large percentage of this bull-run and how many times can a company keep issuing debt at low interest? Who knows, does it even matter? Whats opportunity is there right now?
$SHAK
$VG
$PSA
$RAIL
$ETSY
$TWTR
$ENLC
$ETRN
$HCR
$EQM
The parameter u, lets call the drift rate
or, the expected return
or, the growth rate of the asset.
u = 1/Mt(Sum)Ri
In classical option pricing theory the drift plays almost no role.
Throw a radical over that equation and you got the most elusive and important quantity in the theory of derivatives. Volatility.
So you got this asset oscillating like it always does, naturally. But what is causing spot to transact this way or that? This is the key to the chest where my mind slept. Drift and vol affect spot in different ways. I look at charts to visually see the nature of the underlying. Each underlying is different, and each moves in a unique way. Yet, even though this is true, all of these assets look exactly the same.. you see spot oscillating around some mediocre value area until it drift away from it and establishes a new value area to chug up and down around. Its amazing how theres clarity within the randomness.
Since the market is fractal this can be achieved at many intervals.
I suggest you get familiar with statistics/probability theory/derivative theory etc..
Drift doesn't affect the short-term, but its very apparent in the long-term. The logarithm of an asset, oscillating around the mean (expected path) within a confidence interval. Now depending on which alpha level chosen will determine your C.I level. But assuming normality 68% of the time the asset should be around this range. Now we all know normality is far from our markets. So knowing this we adjust and increase our intuition of our surroundings. The market will fuck you and leave you dead. I've seen it happen to people close to me. It always comes down to sizing up. Stay small and increase your number of occurrences.
Forward Variance meaning what the implied variance will be in N amount of days (30, 60, 90..).
It depends what the article is about. Is average volatility, a) average realized volatility, b) average implied volatility or c) average forward volatility? Also, comparing variance to volatility in that context does not really make sense. It makes more sense to convert everything to vol or keep it as variance.
On another note, why do you believe there are more opportunities when volatility is high?
Thanks for the response.
As far as your question goes, we need to define what "volatility is high" is. Are you talking about IV% on a single or are you talking about the $VIX?
I ask because I'm talking overall vol. Lets just assume a simple asset that moves around. The more this asset moves, the more moves you can take advantage of, but on the other hand if this asset doesn't move much, its very hard to find any trades.
Also I like to buy weak stocks so I'm inherently short vol most of the time. But its extremely hard to short vol when theres no vol.
Also my scanner has loads of tickers when the markets down compared to when the markets up, but of course this is because of my parameters.
Also @TheBigShort i'm curious, when trading earnings are you overall net-net long premo or short? On avg, do you see more outlier moves or subtle moves? Or is it 50/50?