I'm still trying to resolve whether my volume data is even real after accounting for double counting, etc ... I'll be in your rear view mirror for a while.
Root time in term structure
- Thread starter TheBigShort
- Start date
Flaws? Not really. Opportunities? Plenty
Flaws? Not really. Opportunities? Plenty
What am I looking for though? Like I can easily graph the spread between the 3 month and 6 month implied vols and place spread accordingly, but Ill most likely just be selling event vol and buying non event vol(if thats even a term). In regarding root time If the change in term vol is not root time (as you have mentioned) than I could trade accordingly. These seem to basic tho. Any advice?
The APPL vol for a one month option that you read off your screen is ANNUALIZED vol. Same for what you read off your screen for a two month option, that is also annualized.
One month unannualized vol is 1 / sqrt(12) times one month annualized vol.
Two month unannualized vol is 1 / sqrt(6) times two month annualized vol.
Two month unannualized vol is sqrt(2) times one month unannualized vol under flat annualized vol, somewhat more or less than that depending on current vol term structure, events prior to month one expiry, etc.
sure you have the correct username? 2 month is about 24 vol. And why would 1 month be more volatile than 2?
Thoughts:
-- the "volatility" convention in options trading generally refers to percent moves, not points.
-- "volatility" as a word, is used to convey
** degree to which a market may move (in either direction)
** the volatility of the market implied by the option prices associated with it
** the volatility of the market observed from historic, "actualized" observation(s).
Most of the questions on this thread will marvelously disappear, if we can nail down these thoughts beforehand. When you see "volatility", identify to which of these:
-- percent move
-- points move
-- market character
-- IV
-- HV
is the word referring.....
-- the "volatility" convention in options trading generally refers to percent moves, not points.
-- "volatility" as a word, is used to convey
** degree to which a market may move (in either direction)
** the volatility of the market implied by the option prices associated with it
** the volatility of the market observed from historic, "actualized" observation(s).
Most of the questions on this thread will marvelously disappear, if we can nail down these thoughts beforehand. When you see "volatility", identify to which of these:
-- percent move
-- points move
-- market character
-- IV
-- HV
is the word referring.....
"...but Ill most likely just be selling event vol and buying non event vol(if thats even a term)."
It's a *great* term.
The vol you are seeking to map is IV, associated with the option prices expiring up-to-but-not-after that point in time. If you take a single strike (or the short strike of a spread you might wish to write) and graph that out over a half-dozen expiries, you'll see *exactly* what you're looking for, and when you might wish to target. And if you look at the associated news/data/events calendars, you'll likely pick up on what causes that surge/vacuum in vol. Bottom line? You're on the right track.
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Waste of time. Furthermore cannot be done. On top of that will never be done. Too many variables.
Yeah, Q.
Right after we change the gravitational constant of the universe.
