Day Trading Stocks & Futures

[sanju005ind]

Better use this

IV Rank is ranking of current IV in relation to the one-year high & low IV.
IV Percentile is the percentage number of days over the past one year the IVs are under the current IV.
IV Rank & IV Percentile are now calculated over one-year data (52-weeks).
If you are going to use IV Ranks and IV percentiles in your options strategies, please stick to just IV Rank or IV Percentile but not both.

 

[SarangSood]

This is a good idea.

Let me simplify the same idea further down.

Instead of combined premium of CE & PE, for easy understanding let us take only premium of ATM CE of this expiry and compare the price with ATM CE of previous expiry ( with same no of days to expiry). This will give us idea of whether CE of this expiry is cheaper or costly than previous expiry. Right ?

To simply is further down, the same can be achieved by tracking the CE IV's instead of CE Prices. That's is by comparing the ATM CE strike IV of current expiry to ATM CE strike IV of previous expiry ( with same no of days to expiry). But we need to have captured IV data for this.

Note- Some factors like, Future spread difference will hinder the study, but overall it can be achieved.

Though this method can tell you whether the option is cheaper or costly but there would not be any practical use of it. The reason is that different expiries have different events. The bigger the event, the higher the IV.

IMO if we compare the IVs of same delta CE & PE of the same expiry, we can find if there is any discrepancy. This will allow us to know if CE is cheaper in IV than PE or vice versa. Options are very dynamic instruments. So in this method your expiry is the same as well as the delta making them easy to compare. Bdw cosltly option doesn't mean that we can sell it.

 

[Riskyman]

Bro,

The problem is you are thinking that previous day IV numbers will become HV. That is not correct.
Previous day IV numbers are not HV. HV is different.

I know my what my problem is and im gonna stop talking soon and focus on my work.

But to finish what I started, let me state my understanding .... Volatility measures a stock's fluctuation. Implied volatility is a measure of this fluctuation expressed as a percentage. Historical volatility is nothing but a measure of volatility of the past x number of days and is obtained by calculating standard deviations. Therefore, yesterday's volatility will be past data for today while calculating historical volatility. Yesterday's absolute IV number in itself cannot become an absolute HV number because its changing all day( if thats what you think i was implying). Being an options trader, I trusted that you will understand this. But it looks like we are all caught up in the nuances of words. Moreover, you kept insisting that we should compare today's IV with yesterdays.

Edit: Please note that I am never usually condescending with anyone on the forum. However, sometimes if my general tone appears aggressive, please consider that as mostly excitement rather than aggression.

 

[kharikumaar]

I put combined premium because ATM is different at different circumstances. I ignore 50 multiples because they have less liquidity.

Nifty at 8080. ATM = 8100 CE is less than
Nifty at 8100. ATM = 8100 CE is more

But 8100 CE + PE premium should be same other factors same.

Again nifty 7000 Combined premium = 70 = 1 % of underlying is same
at nifty at 8000 combined premium = 80 = 1% of underlying again
So i used percentage of underlying rather than prices.


I have taken into account option pricing is based on
1. Underlying price
2. Choice of strike(ATM/ITM/ OTM)
3. Theta( time for expiry)
4. Vega(IV)

Assumptions: gamma doesnt effect much. Interest rates/risk free rates is more or less same for the year.

i have been reading all the posts with interest . forgive me if i sound stupid or ignorant., and i am not trying to be sarcastic either. what i gather from all this is the study of all this is a fine way to understand the behaviour of the option at a given point in time.

what i have not been able to understand over the years is how do you take a decision based on these whether you should buy a call or put etc etc.., i mean how does one take a trading decision based on all this.

 

[against_tides]

i have been reading all the posts with interest . forgive me if i sound stupid or ignorant., and i am not trying to be sarcastic either. what i gather from all this is the study of all this is a fine way to understand the behaviour of the option at a given point in time.

what i have not been able to understand over the years is how do you take a decision based on these whether you should buy a call or put etc etc.., i mean how does one take a trading decision based on all this.

I dont think so....option ka knowledge aur option ki trading are not linked...otherwise at the same point of time how PE and CE value for same strike price are in different %age..ideally it should be like -5 and+5%age only...

 

[Riskyman]

what i have not been able to understand over the years is .

Thats called "Dimag ka dahi ban gaya"

English translation: Brain has become curd/yogurt

 

[marimuthu13]

Too much discussion about pricing of options , rather using it for trading decisions..

 

[kharikumaar]

I dont think so....option ka knowledge aur option ki trading are not linked...otherwise at the same point of time how PE and CE value for same strike price are in different %age..ideally it should be like -5 and+5%age only...

that's not the point i'm trying to make. i wanted to understand that when there is such a complex and intricate process and method evolved to study the behaviour of options with reg to pricing etc., to what use is this knowledge or study unless it can be used in your trading decision, otherwise why does one need this complex knowledge. it was not developed without purpose

 

[lemondew]

go through this website. Cant write everything. Dont take it or what I or anybody says as gospel. Confirm it by backtesting.

https://optionalpha.com/

i have been reading all the posts with interest . forgive me if i sound stupid or ignorant., and i am not trying to be sarcastic either. what i gather from all this is the study of all this is a fine way to understand the behaviour of the option at a given point in time.

what i have not been able to understand over the years is how do you take a decision based on these whether you should buy a call or put etc etc.., i mean how does one take a trading decision based on all this.

 

[mohan.sic]

Also nifty at 6000 = 60 premium less cannot be compared with nifty at 10000 = 70 premium more . A % would work better.

Because the premiums are generally based on bank interest rates which is a percentage of underlying.

True and very logical. Using % is always correct for many reasons.

I think premiums are not much influenced by bank rates. More over bank rates don't change every day.
so, I think interest rate is also a constant factor in option pricing.
So all other factors being constant, the part of option premium that is dynamic and market driven is represented as IV. So by tracking IV at different times, we can get a fair idea if premiums are becoming costlier or cheaper from time to time.