The markets will go up and down, and usually it’s not my business why they do it, I am just interested in making my luck with a position on the right side of the trade. Continue reading
If you want to trade volatility, you can place a bet on the option market. Just buy an at the money put and call, and at expiry day you will either win or lose, depending on the actual market move since you bought the straddle and the price you paid for the straddle. To put it simple, if the market moves more than you paid for the two options you will win, otherwise you will lose. This article is about a back test of volatility. Continue reading
The 200 day average is considered as a key indicator in everyday technical analysis. It tells us if markets are bullish or bearish. But can this claim be proved statistically, or is it just an urban legend handed down from one generation of technical analysts to the next? Let’s find out and demystify the 200 day moving average. Continue reading
Sometimes my data provider has not got the data I am looking for. Searching for downloadable csv data I recently came across google spreadsheets. It provides an easy way to get historical stock price data. Save it as csv and use it with your Tradesignal. Continue reading
If a bitchy prime minister and a crazy president weren’t enough, for the upcoming months the seasonal chart is also indicating further price setbacks. Continue reading
How to calculate volatility based on the expected return of a straddle strategy has been shown in part 1 of fair bet volatility KVOL.
Using and Displaying K-Volatility:
KVOL uses the given amount of historic returns to calculate an expected value of an at the money put and call option. The sum of these prices are the historic fair value for implied volatility. It can be used to compare current market implied volatility to historic fair values.
Beside calculating KVOL for a specific return period it can also be used to show it as a projection indicator on the chart.
The example on the chart gives such an expectation channel for the s&P500 at the beginning of each month. The 250 days before are used to calculate KVOL. The line underneath the chart is running KVOL for 13 trading days.
to win, with higher volatility expected: you would have bought a straddle at the beginning of the month, expiring at the end of the month. You should not have paid more than a KVOL for 25 bars (working days to expiry) would have suggested. You win if the chart is outside of the projection at the end of the month.
The shown example uses the 250 daily bars before the beginning of the month to calculate the returns and the price of KVOL. The projected lines represent the winning boundaries of the straddle at expiry.