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Straddle as a volatility buying strategy
- Thread starter Alex Pel
- Start date
Alex - The chart below might help explain why the composite index (which is often 30 days) spiked, but didn't help your deferred position. I don't know where IB gets their ATM IV data that you can display on a chart, but I suspect it's also a composite of some sort. FWIW, the 30 day IV index you got from the CBOE site is supplied by ivolatility.com
The IV index data might be fine to get a general feel for the market, but if you're trading in deferred months, you should look at the 30, 60 and 90 day figures because you'll notice significant variation near events like earnings.
If you're interested in the IV index data, ivolatility.com offers free trials for two weeks to all their products, and they're generally dirt cheap to begin with ($15 to $30/mo). As you know, they also provide the real (or raw) IV on each option and you can configure their options chain page to just display ATM contracts - scroll down and they'll show you two to four contracts for each option month and you can fairly quickly see if there is a pronounced time skew. You could configure 'option chains' or 'option trader' in IB TWS to do the same thing.
You can also get IV index or 'constant maturity' IV data from LiveVol or their LiveVol Securities or through TradeMonster. TradeMonster is the source of the above chart, which is ATM IV by specific month, but they buy the constant maturity stuff from LiveVol for their various scans.
The IV index data might be fine to get a general feel for the market, but if you're trading in deferred months, you should look at the 30, 60 and 90 day figures because you'll notice significant variation near events like earnings.
If you're interested in the IV index data, ivolatility.com offers free trials for two weeks to all their products, and they're generally dirt cheap to begin with ($15 to $30/mo). As you know, they also provide the real (or raw) IV on each option and you can configure their options chain page to just display ATM contracts - scroll down and they'll show you two to four contracts for each option month and you can fairly quickly see if there is a pronounced time skew. You could configure 'option chains' or 'option trader' in IB TWS to do the same thing.
You can also get IV index or 'constant maturity' IV data from LiveVol or their LiveVol Securities or through TradeMonster. TradeMonster is the source of the above chart, which is ATM IV by specific month, but they buy the constant maturity stuff from LiveVol for their various scans.
Here's why you should look at the real/raw ATM IV for a specific month(s) before you make a trade, and of course the IV of the contracts you're interested in. My sample shows four out of five firms use what appears to be the same 30-day composite. And then there's Interactive Brokers. I'd be wary of trading using the ATM IV data IB puts on a chart, unless you know their source/method and trust it.
Facebook, Oct 22 2013, ATM option IV measures:
1. Ivolatility.com - IV Index Mean (30 day), chart and table, 77.26%
2. TradeMonster - ATM IV on chart, no further description, 77.54%
3. OptionsHouse - IV Index Mean (30 day), eyeballing a chart, I'd say 77%, but since the chart is hosted by ivolatility.com, I'd say it's 77.26%
4. LiveVol - IV30 value, 78% on a little table that pops up when you hover over Oct 22 on a chart
5. Interactive Brokers - ATM IV, no further description, about 78% on Oct 22, but up to 99% a week earlier (with several days between 80-85% plus). The other four sources do not show a spike to 99%; they show 77-78% on Oct 22 as the 52-wk high.
Facebook, Oct 22 2013, ATM option IV measures:
1. Ivolatility.com - IV Index Mean (30 day), chart and table, 77.26%
2. TradeMonster - ATM IV on chart, no further description, 77.54%
3. OptionsHouse - IV Index Mean (30 day), eyeballing a chart, I'd say 77%, but since the chart is hosted by ivolatility.com, I'd say it's 77.26%
4. LiveVol - IV30 value, 78% on a little table that pops up when you hover over Oct 22 on a chart
5. Interactive Brokers - ATM IV, no further description, about 78% on Oct 22, but up to 99% a week earlier (with several days between 80-85% plus). The other four sources do not show a spike to 99%; they show 77-78% on Oct 22 as the 52-wk high.
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Thanks Brighton.
Great comparison of five firms.
On Oct-15 IB TWS âoption traderâ weeklies were over 200% IV. Thatâs probably why the IV chart had a spike. I am not sure is it ATM or all book. They are not telling the formula.
I start researching http://www.optionstrategist.com/calculators/free-volatility-data
Unfortunately they donât generate individual options IV.
Is anybody using McMillanâs volatility data?
Great comparison of five firms.
On Oct-15 IB TWS âoption traderâ weeklies were over 200% IV. Thatâs probably why the IV chart had a spike. I am not sure is it ATM or all book. They are not telling the formula.
I start researching http://www.optionstrategist.com/calculators/free-volatility-data
Unfortunately they donât generate individual options IV.
Is anybody using McMillanâs volatility data?