Posts Tagged ‘volatility’

Volatility ratio Calculation for Options?

Question by pps p: Volatility ratio Calculation for Options?
The 20 day Volatility Ratio is calculated as 1 Day Implied Volatility divided by 20 Day Statistical Volatility.

The 90 day Volatility Ratio is calculated as 1 Day Implied Volatility divided by 90 Day Statistical Volatility.

Question: We have a Volatlity chart for 3 month ,6 month and 1 year datas only.

Where can i get 1 day Implied Volatility data?
Where can i get 20 day statistcal volatlity data?

I think, we can can get the value of 90 day (3 month) Statstcal volatility since we have volatility view chart for 3 months.

Can someone please help me in how to find out those values (1 day Implied Volatility & 20 day Statistical Volatlity)?

Thank you.

Best answer:

Answer by zman492
<<>>

Simply use the current implied volatility.

<<>>

The easiest way to get it is simply to calculate it. Start by getting the historical prices for the time period you want. You can do this several places, including Yahoo Finance. For example, if I wanted 20 days of historical quotes for INTC I would start at the Yahoo quotes page

http://finance.yahoo.com/q?s=INTC

then click on the “Historical Prices” link to get the page at

http://finance.yahoo.com/q/hp?s=INTC

I would then set the date range I wanted and click on the “Get Prices” button. On the page I got back I would go to the bottom of the page and click on the “Download To Spreadsheet” button to put the data into an Excel spreadsheet.

I would then calculate the standard deviation of the closing prices using the STDEV function. (If you are not familiar with the STDEV function see

http://www.gifted.uconn.edu/siegle/research/Normal/stdexcel.htm )

I would then annualize the standard deviation by multiplying it by the square root of (365 / N) where N is the number of calendar days worth of data I used.

Finally I would convert the annualized standard deviation into the statistical volatility by multiplying it by 100 and dividing it by the price of the stock.

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Help With Volatility Smiles?

Question by lilmissbrittbrit: Help With Volatility Smiles?
Why do you use implied volatility when dealing with volatility smiles?

Best answer:

Answer by zman492
Volatility smiles are based on the lognormal distribution of prices at some time in the future. That distribution is determined by the amount people are willing to bid/ask for options contracts. Using the Black-Scholes model, bid/ask prices determine the implied volatility (the annualized standard deviation, expressed as a percentage of the stock price) of the distribution. When people are willing to “overpay” for options with strike prices far from the current price (of the underlying) that creates “fat tails” to the distribution, also known as volatility smiles.

You do not use historical volatility, also known as statistical volatility, because you are dealing with prices that have not occurred yet and consequently cannot be measured directly.

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ORATS Dashboard to find Fair Volatility at Earnings

Here we use the ORATS Dashboard to analyze a fair volatility around earnings. Value the earnings month volatility based upon a normalized volatility and estimating a percentage move in the stock at earnings. Compare this fair vol calculation to what is implied in the market:

questoptions.com Historical and Implied Volatility are quoted on an annual basis. In this video you will learn how to convert annualized volatility to daily volatility.

What does a zero volatility imply about the value of currency options?

Question by Elke M: What does a zero volatility imply about the value of currency options?

Best answer:

Answer by 60187guy
?…..The options should trade at close to intrinsic value. Zero volatility implies a stagnant market.

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Volatility and Implied volatility (Options Trading)?

Question by omgomgstoplookingatme: Volatility and Implied volatility (Options Trading)?
What’s the difference?

Best answer:

Answer by zman492
Implied volatility is the amount of volatility that an underlying security would have to experience before the expiration of an option for that option to be fairly priced according to a statistical model.

Historical volatility, also known as statistical volatility, is the actual amount of volatility the underlying security has experienced for a recent past time period.

Volatility is the amount the price of the underlying security changes, usually measured as the difference between daily closing prices for the security.

Sometimes you need to take care interpretting what a writer means when he uses the word “volatility” in a sentence. He may mean historical volatility or implied volatility depending on the context of the sentence.

In the options world, all the these volatilities are normally expressed as a percentage of the price of the underlying security and are annualized.

The volatility percentage mulitplied by the underlying price (or the forward stock price if the underlying is a stock) gives you the value of one standard deviation, sometimes called sigma.

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Is there a way to scan for stocks that currently have higher volatility?

Question by Scott: Is there a way to scan for stocks that currently have higher volatility?
I’m looking for a way to get a list of individual stocks that, for whatever reason, have at least an implied higher volatility. Maybe Yahoo finance, or MSN finance has such a screener, but I’m not sure how to get there.
Thanks

Best answer:

Answer by wc
Meta stock, is what you are looking for. It is a stock screener that you can program for several different results. The down side is you have to subscribe to it.
If you use schwab’s street smart pro to buy and sell stocks, it will display the volume of any stock you select.It will not search for you though
You can also go to volatility .com, which is a bit tedious but free.

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Investors Profit Despite Stock Market Volatility With Options Trading

Investors Profit Despite Stock Market Volatility With Options Trading

Boca Raton, FL (PRWEB) November 15, 2006

Ron Ianieri does not loose sleep over reports of a declining stock market. His confidence does not come from avoiding investing completely or indulging in get-rich-quick schemes. The former floor trader and chief options strategist of The Options University employs options, a powerful tool that offers consistent profits despite market volatility.

“There are things that you can do with options that you can not do with stocks,” explains Ianieri. The buzz surrounding options mounts. In September, the Nasdaq announced that it would enter the options product market. The US Exchange also petitioned the US Securities and Exchange Commission (SEC) to allow options trading in penny increments. Weeks later, the SEC revealed it is considering altering an archaic rule that could drastically change the way brokerage firms assess margin requirements on options trading investors.

Historically, investors tiptoed around options because of their reputation of being difficult to understand. Others avoided options because of monikers such as ‘risky’ tacked on by the media and market leaders. “Some of the same people that were telling people to stay away, are now on the options bandwagon,” exclaims Ianieri. Indeed, more investors are finding that options provide increased cost efficiency, are less risky, give higher percentage returns and offer more strategic alternatives.

According to Ianieri, an investor’s ability to manage risk determines their success or failure. Many incorrectly define leverage as using same amount of money to create a larger position. Successful investors create the same sized position with less money. Not understanding option theory also increases the chance of failure. Investors are tempted to make a trade after learning a few strategies. “Any class or book that doesn’t teach the fundamentals, is teaching them how to fail,” asserts Ianieri.

The expert warns that the SEC and Nasdaq’s announcements increase the need for comprehensive education. Investors nationwide are heeding his advice. Through The Options University, Ianieri offers guidance through in-person seminars, virtual classes, home study courses and one-on-one consultations. “There is more to trading options than strategy,” says Ianieri. “Once investors have this knowledge, they will know how to react in turbulent markets and can stay profitable regardless.”

About The Options University, LLC

The Options University is the leading source for options education for safer investing and better profits. Maximizing the experience of co-founder Ron Ianieri, a former floor trader with 14 years of experience on the Philadelphia Stock Exchange, the educational company is uniquely qualified to teach investors how to make consistent profits while limiting risk. For more information on The Options University, visit http://www.optionsuniversity.com.

###

©Copyright 1997-

, Vocus PRW Holdings, LLC.
Vocus, PRWeb, and Publicity Wire are trademarks or registered trademarks of Vocus, Inc. or Vocus PRW Holdings, LLC.

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Beware of The Volatility Headfake: One Good Downward Spike

When I read declarations by Goldman about the median daily moves for stocks during earnings season the hair on the back of my neck stands up, it reminds me of the old trading days where whatever you see or hear is not real and you better strap on your counter intuitive hat so you don’t get on the wrong bus.

It’s also very scary when Goldman starts broadcasting trading strategy (this clearly can only be a head fake) regarding selling MSFT covered calls for clients. Shorting Call Option premium during a hard selloff while you are long the under lying stock is a losing trade, and one Goldman would gladly take the other side of.

This tells me that markets are about to take a huge dump after a long rally.  There is absolutely zero chance that Goldman Traders would let anyone know what they intend to do for their largest clients.  I should explain that  Prop Trading is gone from the desks on Wall Street but there is not a  trader in his right mind that would let an internal strategy go out to the wires.  Below is some information from a variety of news services talking about this subject and it made me laugh!!  Beware !!  We are due for Volatility and a good downward spike.

The current earnings season so far has been one of the least volatile in years with large, one-day moves in shares after a company reports results a rare occurrence, Goldman Sachs Group strategists said. On average, stocks have moved 2.7 percent on their earnings reporting days, the lowest average daily move for the first two weeks of earnings since 2007, wrote equity derivative strategists John Marshall and Maria Grant in a report on Wednesday.

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The four-year median daily move is 4.8 percent.  “If earnings moves continue to be so modest, this could be the least volatile earnings season since our data series begins in 2003,” the strategists wrote. They are now leaning toward more option selling strategies given the stable earnings results and small moves in the shares.
With a strong start to earnings season, high expectations have been priced into shares, and only very large earnings surprises have been rewarded with big moves.

So far, only 17 percent of stocks have moved more than the options market implied on earnings day, making volatility buying strategies challenging, the analysts said.  Goldman lists only 12 stocks that have made earnings day moves 25 percent greater than their median move over the past eight quarters, a list that includes Google Inc (Nasdaq:GOOG ), Alcoa  (NYSE:AA ) and Halliburton  (NYSE:HAL).

Given this pattern, along with a recent trend of late reporting results being less volatile in general, the options team sees opportunities to sell options or employ more volatility-neutral strategies to capture more modest moves.

For example, the team recommended that Microsoft Corp’s (NasdaqGS:MSFT ) stockholders should consider selling January 2011 .50 covered calls to increase yield on what has been a range-bound stock. Microsoft earnings, due on Thursday, are unlikely to be a meaningful catalyst, they said.  Covered calls involve selling a call option to gain income on a long position in the shares.  Investors selling covered calls risk limiting the stock upside to the call strike and remain exposed to stock downside risk. An equity call option grants the right to buy shares at a fixed price any time until expiration.

Goldman pointed out stocks beating consensus earnings estimates by three standard deviations have had a median outperformance of 211 basis points vs the S&P 500, while firms beating by between one and three standard deviations have underperformed by a median of 17 basis points as of October 21.

For more information visit

http://www.worldmarketmedia.com/779/section.aspx/2603/post/beware-of-the-volatility-headfake-one-good-downward-spike

Pt 1, Mark Sebastian: Volatility and its Effect on ISE FX Options

Join Mark Sebastian of Option911.com and learn how changes in implied volatility affect your FX option positions. The option “Greek” Vega and its impact on options pricing will be explored. The benefits and drawbacks of vega exposure is also discussed.

In the final episode, we talk about how Vertical Skew and volatility analysis can be used to position trades that incorporate the multi-dimensionality of time decay, probability theory and chart technicals.
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what is implied volatility?

Question by Exlr8.ws: what is implied volatility?

Best answer:

Answer by taz_n_sara
From the below source:

“A measurement of the market’s expected price range of the underlying currency futures based on the traded option premiums”

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