As an option seller you want the market to stay within the range prognosticated by implied volatility. But what is the historic probability that markets behave as expected? And what other analysis could be done to enhance your chances?
Tag: volatility
Daily Extremes – Significance of time
Analysing at which time daily market extremes are established shows the significance of the first and last hours of market action. See how different markets show different behaviour and see what can be learned from this analysis.
Noisy Data strategy testing
Algorithmic trading adds noise to the market we have known. So why not add some noise to your historic market data. This way you can check if your algorithmic trading strategies are fit for the future. Learn how to generate noisy data and how to test your strategies for stability in a noisy market.
Monte Carlo Simulation of strategy returns
Monte Carlo Simulation uses the historic returns of your trading strategy to generate scenarios for future strategy returns. It provides a visual approach to volatility and can overcome limitations of other statistical methods. Monte Carlo Simulation
Overnight vs Daytime Performance & Volatility
Analysing the market performance of the day session vs. the overnight movement reveals some interesting facts. Daytime vs. Overnight Performance
Bullish? Buy stock or sell put option?
Is it more favourable to buy shares directly or to get assigned from a short put position. See the arguments and learn how to decide this question.
An Algorithmic Stock Picking Portfolio
A volatility and return based stock picking algorithm. Portfolio construction, picking criteria and the ideas behind this approach. Excess returns of your portfolio against an equally weighted index portfolio.
The average move of a market
Markets have a high degree of randomness (and madness), but there are some things which hardly change over time. One is the width of an average market move before a counter-move can be observed.
Market crash or market correction?
The difference between a crash and a market correction. VIX and realized volatility give the answer
Bollingerband: The search for volatility
Will the market stay within it’s normal distribution range or will there be a breakout of this range? The Bollinger percentile indicator will give the answer.
Tradesignal Implied Volatility and IV Percentile Scanner
Use free data from the web and load it into Tradesignal to scan for implied volatility and IV percentile. Full code given for free
IV Percentile – when to sell volatility
IV percentile and IV rank both describe implied volatility. Which one is better in finding out if it is time to sell volatility? Read the answer in this article
Implied vs. Realized Volatility for NASDAQ100 stocks
Comparing implied volatility to realized volatility can show you the right stocks to sell volatility. An overview over the implied and long term realized volatility of NADAQ100 stocks is given.
Distribution of Returns
“Tomorrow never happens. It’s all the same fucking day, man. ” Janis Joplin
Bet on Bollinger
Ever since John Bollinger introduced his Bollinger Bands in the early 1980s the bands have been a favourite indicator to all technical trades. This article is about the prediction capabilities of Bollinger bands.
Backtesting Market Volatility
Backtesting if historical volatility or Kahler’s volatility gives a better prognosis for future volatility. Calculating the average prediction error of these two volatility indicators. Testing for the influence of data points used on the quality of the prediction. Comparing the findings to implied volatility to generate a trade idea.
Demystifying the 200 day average
The 200 day moving average is a classic of technical analysis. but is there any edge or statistical significance in it? How do equity and Forex market differ when it comes to this indicator? See the analysis and the answer to these questions.
Money for nothing
We already had a post regarding the mean reverting tendency of Volatility, now it`s time to make some money using this information.
KVOL Volatility part 2
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… Continue reading KVOL Volatility part 2
Statistics of VIX
This article is about the statistics of VIX. What determines if it is better to sell or to buy volatility. Some simple statistics can provide the answer and also show the dangers of this kind of volatility trade.