Which IV is correct?
- Thread starter BlackCat
- Start date
Imp Vol (%) is the simple IV of the options that you're looking at, you know what that is and what you want it forQuote from spindr0:
All I want is the simple IV of the options that I'm looking at. I know what that is and what I want it for
What exactly is the Imp Vol (%) ? What is it used for?
It is good when we are trying to precisely define things that we use all the time without much consideration.
Hope this article will help: http://www.trading-plan.com/options_volatility.html
Hope this article will help: http://www.trading-plan.com/options_volatility.html
1) Volatility is the square root of variance. The number is annualized. If you don't know what that means, stop trading options right now, at least vol trades.
2) IV is the volatility you would get if you inverted the Black Scholes function to solve for vol, given the other parameters that are easily observable. It is a way to "back out" what the market "thinks" the right vol at that instant for that strike/expiration. It is a forward looking number that is the markets estimate (mean) of realized volatility for the rest of the options life.
3) There are literally thousands of theoretical papers on what the correct way to estimate vol is. It is no exageration to say that better vol estimates, particularly the shape of the smile/smirk/term-structure, is what makes an options trader money, all other things being equal.
http://en.wikipedia.org/wiki/Stochastic_volatility
nitro
2) IV is the volatility you would get if you inverted the Black Scholes function to solve for vol, given the other parameters that are easily observable. It is a way to "back out" what the market "thinks" the right vol at that instant for that strike/expiration. It is a forward looking number that is the markets estimate (mean) of realized volatility for the rest of the options life.
3) There are literally thousands of theoretical papers on what the correct way to estimate vol is. It is no exageration to say that better vol estimates, particularly the shape of the smile/smirk/term-structure, is what makes an options trader money, all other things being equal.
http://en.wikipedia.org/wiki/Stochastic_volatility
nitro
I assume that the last two replies were for me since they followed my post asking about IV. If so, I appreciate the attempt to answer my question but you've missed its context. I'm not looking for an explanation of what volatility and implied volatility are or how to use them. I kinda have an idea of what they are.
I'm really a bit more interested in how a user of the Interactive Brokers trading platform gets an option's IV displayed. I'm not a big fan of calculating it myself for every option that I look at. As stated by another poster in the chain, he too would like to know that as well.
The closest thing that IB offers in the Option Chains configuration menu is IMP VOL (%) which they define as:
"The average of the best bid and best offer for an option. This calculation is non-linear and may not converge for low vega options. In such cases, no implied volatility estimate will be displayed."
To get out of the realm of subjective description and provide something more explicit...
AAPL closed at $171.94 and the Dec 170c at $9.90 and the Dec 170p at $7.75
Without dropping down to calculate the precise IV of these options, please accept that they're approximately 47+
The IB numbers for the IMP VOL (%) numbers provided for the 170c and 170p are respectively, 3.11% and 3.08%
So to repeat, the platform does not provide the IV numbers of 47 for the options cited. It provides 3.11% and 3.08% for what they define as IMP. VOL (%)
So again, my previous questions were:
What is the IMP VOL (%) ?
What is it used for?
What is the denominator? (which seems to be implied by the % sign
Or perhaps another question. If I can't have IV, is there a way to use IMP VOL (%) as a substitute?
LOLOL. I just want the friggin IV number
:eek:
I'm really a bit more interested in how a user of the Interactive Brokers trading platform gets an option's IV displayed. I'm not a big fan of calculating it myself for every option that I look at. As stated by another poster in the chain, he too would like to know that as well.
The closest thing that IB offers in the Option Chains configuration menu is IMP VOL (%) which they define as:
"The average of the best bid and best offer for an option. This calculation is non-linear and may not converge for low vega options. In such cases, no implied volatility estimate will be displayed."
To get out of the realm of subjective description and provide something more explicit...
AAPL closed at $171.94 and the Dec 170c at $9.90 and the Dec 170p at $7.75
Without dropping down to calculate the precise IV of these options, please accept that they're approximately 47+
The IB numbers for the IMP VOL (%) numbers provided for the 170c and 170p are respectively, 3.11% and 3.08%
So to repeat, the platform does not provide the IV numbers of 47 for the options cited. It provides 3.11% and 3.08% for what they define as IMP. VOL (%)
So again, my previous questions were:
What is the IMP VOL (%) ?
What is it used for?
What is the denominator? (which seems to be implied by the % sign
Or perhaps another question. If I can't have IV, is there a way to use IMP VOL (%) as a substitute?
LOLOL. I just want the friggin IV number
:eek:You can choose to view volatilities in either daily or annual percentage terms. On the Configure menu, select Misc and then select Volatility Units. Choose Daily or Yearly.
Apparently you are set to daily. Switch to annual for the approximate 47% :
3.11 * sqrt(252) ~ 47
Apparently you are set to daily. Switch to annual for the approximate 47% :
3.11 * sqrt(252) ~ 47
Just to amplify/confirm what a poster said earlier, with IB you used to be able to display IV for individual options on the main trader screen. Apparently an "enhancement" changed that capability and now the IV column on the main screen only presents figures against the underlying stock. IV figures no longer display for each option.
Same problem for options volume. That is, on the main trader screen only the total volume for all contracts is displayed against the underlying security. The volume for individual contracts is no longer displayed.
I think these items can be displayed properly on the Options Trader screens, but I find that screen slow and awkward to use.
Talking to IB tech support was kinda frustrating, they did not seem to know that these displays had changed.
I suspect that the IV data might have consumed a lot of computing horsepower and that might have been IB's motive for changing it. However, I doubt that the same is true for option volume data.
Don
Same problem for options volume. That is, on the main trader screen only the total volume for all contracts is displayed against the underlying security. The volume for individual contracts is no longer displayed.
I think these items can be displayed properly on the Options Trader screens, but I find that screen slow and awkward to use.
Talking to IB tech support was kinda frustrating, they did not seem to know that these displays had changed.
I suspect that the IV data might have consumed a lot of computing horsepower and that might have been IB's motive for changing it. However, I doubt that the same is true for option volume data.
Don
Hey Don, LTNS
I have found tech support to be helpful. The problem is that they need a tech support guy who also understands options so that he can straddle both worlds and provide appropriate direction.
FWIW, I am getting individual option volume and now, thanks to nonprophet, IV, on the main screen. If you want some bread crumbs, E-mail me
I have found tech support to be helpful. The problem is that they need a tech support guy who also understands options so that he can straddle both worlds and provide appropriate direction.
FWIW, I am getting individual option volume and now, thanks to nonprophet, IV, on the main screen. If you want some bread crumbs, E-mail me