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ONE Volatility Settings...

Discussion in 'Options' started by William Smith, Nov 11, 2015.

  1. William Smith

    William Smith Member

    I see that ONE now has CEV, combined put/call skews, etc. Can anyone comment on the CEV setting? It defaults to .70, but I'm not even sure what that means, let alone how to set it. Any pointers would be appreciated.

    Bill
     
  2. Duane Glick

    Duane Glick Member

    I have a two positions ( Bear Butter and an M3 ) on and in Optionvue using true delta and combine call/put skews for analyze greeks and graph . In OptionNet Explorer version 1.27.12 beta with volatility surface , smooth and cev .7 checked the greeks right now are very close to the same as OptionVue . On the 2 lot Dec BB OptionVue delta greeks are -21.79 and ONE shows -20.17 . The 10 lot Dec M3 shows deltas at -8.01 and in ONE they are -4.56 . As far as setting the cev up or down some it didn't seem to change things much.

    Duane
     
  3. William Smith

    William Smith Member

    Thanks Duane. I am finding the same thing. The Greeks and graph seem pretty close now. I have also played around with the CEV .7 and don't see a big difference. I suppose the default setting is good enough for now. I just don't understand it. In any case, I feel much better about the Greeks overall now.
     
  4. Gabor Maly

    Gabor Maly Well-Known Member

    The 0.70 is the CEV factor ONE uses, this is now manual but is planned to be automatically calculated in future releases.
    A good post on the CEV factor can be found here.
    https://discoveroptions.com/mixed/content/education/articles/cevfactor.html
     
    TheSpeculator152 and GreenZone like this.
  5. William Smith

    William Smith Member

    Thanks for that article. That's the best explanation I've seen. I'm still not quite sure how to assess it or set it, but at least I understand a little more of what it is. The fact that 1.0 is the point at which there is a negative or positive correlation to price, almost makes me think that 1.0 would be a good setting if we don't quite know what the current implications are. Another part of me just says, "What the hell do I do with this thing." o_O
     
  6. ACS

    ACS Well-Known Member

    One complication is that the relationship will change, especially at the extremes of volatility. If IV is very low then it often will drop less than expected on a rally while with very high IV it might not go up as much as expected on further decline and go down even more than expected on a rally.
     
    Venkat likes this.
  7. Al G.

    Al G. Well-Known Member

    Duane on the ONE software due you have combine put and call skews box checked? Also on your two positions are they on SPX or RUT.
    Thanks
     
  8. Duane Glick

    Duane Glick Member

    The postions are in RUT and I do not have combine call/put skews checked in ONE . I tried but then it didn't match up as close with OptionVue deltas . I noticed also that the further away you get from being under the tent of your Butterfly the deltas match less .
     
  9. Kevin Lee

    Kevin Lee Well-Known Member

    I don't have ONE but just curious - how does it handle CEV for different expiry duration ? In addition, the CEV should be different depending on whether the underlying makes a move in a day or over a few days.

    OV handles this by having individual CEVs for expiration duration of 30D, 60D ... up to 2 years and for 1, 5, 10 days movement.

    upload_2015-11-13_0-50-6.png
     
    Last edited: Nov 13, 2015
  10. Gabor Maly

    Gabor Maly Well-Known Member

    At the moment there is single value that can be manually overwritten and I suppose this is used for all expirations and for all moves regardless the timeframe of the move.
     
  11. Kevin Lee

    Kevin Lee Well-Known Member

    Thanx for the reply. That's what I suspected.

    However, I think at a minimum CEV needs to be separate for different expiration because IV becomes much more reactive nearer to expiration. A one-size fit all CEV can be misleading. In addition, the way that OV splits CEV by "days of underlying movement" is quite useful too. It'll increase the accuracy of the T+n graph.
     
  12. Gabor Maly

    Gabor Maly Well-Known Member

    Agree Kevin and I just had a quick email exchange with Andy and the plan going forward is to have a CEV setting for each expiration (automatically populated) after the current version is thoroughly tested.
     
    TheSpeculator152 likes this.
  13. Jay Winger

    Jay Winger Active Member

    Just a note: I've been working with Andy on the beta for awhile. I would not recommend that anyone use ONE 1.27.12 to manage live positions with the volatility surface/variable vol model active yet. Andy just connected the model to live data in this latest release, and I'm not convinced that everything is passing thru the model into live data correctly yet. Andy confirmed that this beta is not intended to be used for managing live trades, just for backtesting the model for improvement and feedback.
     
    Last edited: Nov 14, 2015
    Chuck, GreenZone and Al G. like this.
  14. Balazs

    Balazs Member

    When is the live version expected of ONE after this BETA? It seems to be, even though I am relatively new, that most of the conversations and lately also the webinars are about how the different softwares can not be trusted, or there are discrepencies. To be frank, for me, as a retail trader and not an options expert as some of you are here, it is completely impossible to follow and to understand which versions, which settings work when in what conditions, with which IV and how far OTM. If anybody can provide me some clarity, that would be very much apreciated. :)
     
  15. TheSpeculator152

    TheSpeculator152 Well-Known Member

    @Balazs, well said. Very confusing that OV volatility model is "broken" and the software is so old and slow. ONE looks promising but does not seem to have enough industrial strength yet.


    Sent from my iPhone using Tapatalk
     
  16. Kevin Lee

    Kevin Lee Well-Known Member

    Balazs,

    My recommendation is to follow a trading system and whatever software the coach/mentor uses, use the same. As none of the software is perfect, what you need is consistency. You need a software that will perform consistently to the trade plan, even though it might not be completely accurate.
     
    TheSpeculator152 likes this.
  17. TheSpeculator152

    TheSpeculator152 Well-Known Member

    @Kevin Lee, well said! While I completely agree with you, I am just so frustrated that OV is such an old piece of technology.

    OV does not support:
    • 64-bit so the max amount of RAM that can be utilised is 3.5GB
    • Multi-core / multi-thread. I have 8 cores in my PC and OV can only use one!
    • Multi-monitor setups (serious traders have multiple monitors)
    • Keyboard short-cuts (very mouse intensive)
     
  18. Andrei

    Andrei Well-Known Member

    I think the problem is that many, if not most. people on this site (including myself) are following JL's methods, developed on now defunct of OV model. So we all need to find a new tool/model and adjust our trading. I had many issues with OV, but its value as a stable analytical platform outweighed all of them, now it is neither stable nor acceptably accurate.

    So I am forced to look at several model and settings to make my decisions, it actually helps me to expand my knowledge and understanding of options. But on the other hand, I would like to make running my business a little easier with finding, once again, a reliable analytical tool. I really hope ONE will be the one.
     
  19. TheSpeculator152

    TheSpeculator152 Well-Known Member

    Me too. I have high hopes for ONE as well.

    See my complaints about OV above - just from a software architecture PoV alone, this platform is not up to modern standards. I heard somewhere that OV does not have the resources to re-build the solution from the ground up.
     
    Last edited: Dec 13, 2015
  20. Kevin Lee

    Kevin Lee Well-Known Member

    Agree... OV is a dinosaur. Only problem is the alternative is worse.

    Fortunately i find the new v7.80 good enough. In fact, it might be even slightly more accurate than the old v7.64.
     
    Capt Hobbes and ACS like this.

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