Valuable IV Rank thinkscript for TOS

[Brighton]

FYI, if you can tolerate the ads (I think they go away if you pay), ivolality.com has a similar feature that I occasionally use for a group of high-flyers. It uses their 30 day IV index; I'm not a T.O.S. customer so I don't know what data they manipulate for ranking. Seems like it would have to be some sort of 'constant maturity' measure (if that's the right name).

 

[vanv0029]

I actually think the IV percentage rank for a particular company is quite a good
indicator. Although one needs to also look at absolute volatility compared to
the market (or just absolute to make enough per trade). Tasty Trade (Sosnoff)
advocates a system that mostly makes money from time decay and probability
of option touches. Tasty Trade does have a research department. Mostly
their conclusions is that high IV is almost always too high so it is better to fade it.

Obviously, there is a different type of high volatility for biotech binary events and low
volume and low priced stocks. I watch the shows and use the Bob recommendations
to help my trading. I am way too rational so the Tasty Trade show has given
me a sort of old Chicago pit environment to try to change my trading with lots
of viewpoints, lots of ideas, lots of irrational methods, etc.

Tasty Trade's current recommendations to fade high IV in commodities such
as NG are totally stupid, but for stocks without fundamental commodity properties,
I think the ideas work.

 

[Maverick74]

Quote from vanv0029:

I actually think the IV percentage rank for a particular company is quite a good
indicator. Although one needs to also look at absolute volatility compared to
the market (or just absolute to make enough per trade). Tasty Trade (Sosnoff)
advocates a system that mostly makes money from time decay and probability
of option touches. Tasty Trade does have a research department. Mostly
their conclusions is that high IV is almost always too high so it is better to fade it.

Obviously, there is a different type of high volatility for biotech binary events and low
volume and low priced stocks. I watch the shows and use the Bob recommendations
to help my trading. I am way too rational so the Tasty Trade show has given
me a sort of old Chicago pit environment to try to change my trading with lots
of viewpoints, lots of ideas, lots of irrational methods, etc.

Tasty Trade's current recommendations to fade high IV in commodities such
as NG are totally stupid, but for stocks without fundamental commodity properties,
I think the ideas work.

If you don't normalize for price the reading is absolutely worthless. Garbage in/garbage out.

 

[drownpruf]

It's pointless and I am tired of seeing Sosnoff whore himself and ICs. He's also in the latest LOTR film.

 

[Squilly_D]

Quote from newwurldmn:

looking at IV percentiles is pointless. The market isn't stupid. Vols get bid for a reason. Without understanding the reason you are likely to blow up (at least on the selling side).
Every biotech name will eventually be in the 100th percentile. Does that mean you will be limit short?

Every risk arb name will be in the zero percentile. Does that mean you will buy all those options limit long?

Tastytrade teaches to only use underlyings that are deemed *tradable*. People that follow this method of trading would avoid names that don’t meet the *tradable* conditions regardless of the IV Rank. These requirements are high volume of the stock, high volume and open interest of the option chain, and tight bid/ask spread of the options. What comes out on the other side of that usually only falls to about a handful of underlyings at any one time and your usually cycle back to the same names. This is my style/method of trading and it works. This indicator lends itself to this style/method of trading.

Most Biotech stock (from what I’ve seen) have B/A spreads you can drive a Mack Truck through. Tastytrade, specifically Tom and Tony always warn of staying away from those (selling Vol) due to the illusion you have commented on. I’m not too sure about the other example you give so I can’t comment on that (Risk Arb).

 

[piezoe]

Quote from Maverick74:

That is a TERRIBLE way to look at implied vol. You know, Sosnoff is a smart guy and filthy rich now, I find it hard to believe he sells that indicator in the fashion he presented it.

Mav, we've found something we can agree on!

 

[xandman]

Not Bad. Some folks just work better with visuals. However, it isn't a fast way to generate ideas. I was gonna offer the forum my yahoo/excel/hoadley etf dashboard with conditional formatting but was getting reliability issues before I flew out for vacation.

I like the ivolatility search that Brighton presented. Can anybody screenshot a fancy livevol SQL query?

 

[xandman]

Quote from newwurldmn:

looking at IV percentiles is pointless. The market isn't stupid. Vols get bid for a reason. Without understanding the reason you are likely to blow up (at least on the selling side).
Every biotech name will eventually be in the 100th percentile. Does that mean you will be limit short?

Every risk arb name will be in the zero percentile. Does that mean you will buy all those options limit long?

Actually, I have shorted a few naked calls past my sleep point on biotechs.

Why does biotech vol remain at elevated levels thru period n expiration, when the expected announcement is not expected until n+1 ?

 

[Brighton]

Quote from vanv0029:

Tasty Trade's current recommendations to fade high IV in commodities such as NG are totally stupid, but for stocks without fundamental commodity properties, I think the ideas work. [/B]

Selling vol in NG is tempting now, but it's not for under-capitalized newbies. I visited Big Mike's Trading over the weekend to glance at the huge option selling thread and read some painful stories about guys who sold 2 delta (.02) calls a few days or a week earlier. They were hurtin' for certain. If they held on, they felt better after the weekend but the pain returned in a major way today.

From what I've seen, more than a few of those guys are playing follow the leader (the thread starter, Ron) and selling large quantities of less than 4 delta options. They talk about (low) delta and margin incessantly, but almost never about IV. It's a chronicle of a death foretold...

 

[Squilly_D]

Quote from Maverick74:

If you don't normalize for price the reading is absolutely worthless. Garbage in/garbage out.

I’m not sure what you mean by normalizing price and what it has to do with using a ranking of Implied Vols within the TOS platform for a particular underlying. Not saying it isn’t important but I’ve done quick a bit of trades where the IVR as >50%, and yes the price was still gyrating around, but once it stabilized/settled down, the Imp Vol (and IVR for that matter) dropped like a rock. The requirement here is staying small in contracts relative to my capital size and giving myself time to be right (going out to the next month if the front month/time period has less than a certain amount of days). I’ve done this throughout the year in TSLA and currently working it the same way in TWTR. Just a different method of trading.

Going a little further in an example, if by chance a price gets to the strike that I'm short (whether call or put), I immediately sell the corresponding call/put creating a straddle (no additional capital required and sense I stayed small in the number of contracts anyway, I’m well below in margin requirement relative to overall capital). If price continues I buy back the other side and move up/down a strike or two. Yes it can get messy, but I'm taking money off the table as the underlying yo-yo's around. Yes I've had calls below price and puts above. But once price settles for a few days, and based on the position I currently have and what I've already taken off the table, I then determine if it’s worth keeping on or not. Yeah, it sounds like a mess but I'm amazed on the fact that it worked a number of times for me in TSLA alone (different occurrences as it moved from the 80's [when I got involved in it] to 190's). Hard to explain but the segments on tastytrade title "Anatomy of a Trade" do a better job of explaining how to stay mechanical when naked positions go against you. This is where I've picked up this style of trading.