Should we trust Vega calculations?

[candeo]

Rallymode,

TOS can model each strike independantly. Just click on the wrench and then on "more".
Anyway, for those of you interested, I just had a long chat with TOS's support, and they confirmed what I was saying:

Their model accurately predicts future IV's and P/L EXCEPT around earnings/FDA announcements etc..
So for example a RC will NOT profit from IV crush, even if this is what their model is showing.
Scriabinop, we should not use the "volatility steps" in their model. Of course, we can always change each IV independantly but this requires some guessing. Of course for longer term plays their calculations are correct, and a RC would profit from IV crush over the long term.

 

[MTE]

Quote from candeo:

Rallymode,

TOS can model each strike independantly. Just click on the wrench and then on "more".
Anyway, for those of you interested, I just had a long chat with TOS's support, and they confirmed what I was saying:

Their model accurately predicts future IV's and P/L EXCEPT around earnings/FDA announcements etc..
So for example a RC will NOT profit from IV crush, even if this is what their model is showing.
Scriabinop, we should not use the "volatility steps" in their model. Of course, we can always change each IV independantly but this requires some guessing. Of course for longer term plays their calculations are correct, and a RC would profit from IV crush over the long term.

Exactly, modelling future PnL requires a lot of guessing, both for volatility and stock price. The model is only as good as are the assumptions/inputs, so if your assumptions are wrong then your modelled PnL will be significantly different from the actual one, but that doesn't mean the model is broken, it just means you used the wrong assumptions.

 

[rallymode]

Quote from candeo:

Rallymode,

TOS can model each strike independantly. Just click on the wrench and then on "more".

Great, i didnt know that. Maybe i should reopen my acct.

 

[MTE]

Quote from candeo:

Rallymode,

TOS can model each strike independantly. Just click on the wrench and then on "more".
Anyway, for those of you interested, I just had a long chat with TOS's support, and they confirmed what I was saying:

Their model accurately predicts future IV's and P/L EXCEPT around earnings/FDA announcements etc..
So for example a RC will NOT profit from IV crush, even if this is what their model is showing.
Scriabinop, we should not use the "volatility steps" in their model. Of course, we can always change each IV independantly but this requires some guessing. Of course for longer term plays their calculations are correct, and a RC would profit from IV crush over the long term.

TOS can model each expiration independently, not strike.

 

[AmbushHillbilly]

Quote from candeo:

Their model accurately predicts future IV's...

I suspect TOS didn't tell you that verbatim.

If they did I need to find out where that button is.....LOL.

 

[candeo]

Quote from AmbushHillbilly:

I suspect TOS didn't tell you that verbatim.

If they did I need to find out where that button is.....LOL.

You know what I mean: they estimate future IV's and P/L depending on the move of "entire IV" that you anticipate.

 

[AmbushHillbilly]

Quote from candeo:

You know what I mean: they estimate future IV's and P/L depending on the move of "entire IV" that you anticipate.

yeah, I knew what you meant...

...just gigging ya.

 

[rallymode]

Quote from MTE:

TOS can model each expiration independently, not strike.

Ok, it's what i thought. Let me cancel my application. LOL

 

[MTE]

Quote from candeo:

You know what I mean: they estimate future IV's and P/L depending on the move of "entire IV" that you anticipate.

You should really change the terminology you use! TOS is doing NO estimation of future implied volatility whatsoever, the only one making estimations is you when you change the volatility number on Analyze tab in TOS.

 

[MTE]

Quote from rallymode:

Ok, it's what i thought. Let me cancel my application. LOL

I don't know how much time has passed since you looked at their software, but I can tell you that in the last year it has come a long way, so it may still be worth it re-opening that account.