Optionvue Update

Discussion in 'OptionVue Forum' started by Kevin Lee, Dec 24, 2015.

  1. dacamon

    dacamon Member

    Thanks Ron! I will watch it for sure


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  2. TheSpeculator152

    TheSpeculator152 Well-Known Member

    Thanks a lot. Great explanation! Well deserved "like" ;-)
     
  3. Kevin Lee

    Kevin Lee Well-Known Member

    Yes 20-30 pts is good enough to see some effect.

    In terms of software, no special software, just the "good old excel" with TOS DDE. As part of my firedrill, I also export matrix data from OV in back trader mode. With that i get 30 min interval data of options pricing, greeks and IV skew.
     
  4. Balazs

    Balazs Guest

    Hi Ron,

    I really liked your presentation yesterday in Trading group 2. I could not say anything as I was driving and was only listening to what your were saying. Afterwords I looked at the recording. You mentioned that you would be monitoring the skews more closely in the future and make trade disissions based on these skews. While I was looking and checking the skew in ONE, I happened to notice, that ONE already calculates the skew in it's T+0 line, when making adjustments. At least that is what I believe I am seeing. I am posting the two scenarios here (screenshots). Can you let me know if I overlook something? As far as I can see, when I moving the upper long puts downwords, my Delta is less negative (the T+0 line is clearly putting in more upsaide potential) then when I move my shorts upward.
    Of course every advantage has a disadvantage. Moving the longs downward, I move the tent also downward. When I move my shorts upward, the upperside of tent does extend a little bit to the upside as well...
    Am I correct? Does the ONE model already count in the skew? How is this in OV?

    Balazs
     

    Attached Files:

    dacamon likes this.
  5. Boomer34

    Boomer34 Well-Known Member

    Great topic. Thanks for posting your insights everyone. This is very helpful for the newer traders!
     
  6. Kevin Lee

    Kevin Lee Well-Known Member

    Well done Ron ! The discussions about adjustments to M3 are spot on. Thanx for the video.
     
  7. GreenZone

    GreenZone Well-Known Member

    Yes, if you're using the ONE beta and have CEV and "vol surface" enabled, then *current* skew and IV levels will be taken into consideration.
    .....but that's not what I was getting at in the presentation from yesterday.

    The main point is that if you *anticipate* a move up or down, and you have an understanding of what will happen to the skew when your expected move happens, then you can try to take advantage of this info in order to set up a new trade or to adjust an existing trade.
    No software can predict what will happen to the skew in the future. They can only do calculations based on the current skew.
    It's up to us to understand how skew will morph if you get a quick move up or down......and skew will morph differently if the speed of the move is slow/grinding.
     
    Andrei, Bill C, Timo and 1 other person like this.
  8. GreenZone

    GreenZone Well-Known Member

    ...and thank you Kevin for bringing up this important topic here in the forum.
    I love it when we can collaborate and build on ideas proposed by others.
    It's a win/win situation for everyone involved........as well as the lurkers who hide in the corner ;)
     
    dacamon likes this.
  9. Kevin Lee

    Kevin Lee Well-Known Member

    Agree Ron... It's a team work. You can explain the concept much better than I can. :)

    You were spot on in explaining that shifting the long strike down is a better adjustment if market rallies and the IV skew steepens. I would like to share my thought about the choice between shifting the butterfly short strike up and shifting the right leg down. Both creates positive delta but they are suitable for different scenarios.

    1. Shifting the right leg down usually adds negative theta and positive vega (depends on where the right leg is relative to ATM). In normal situation, that's not desirable. But after a sell off and when market is rebounding, the right side of the T+0 will drop and delta becomes negative much sooner than expected due to the steepening of the IV skew. As a result, the adjustment point will likely be well within the tent. If so, the position theta will likely be quite rich and vega quite negative. Therefore, adding some negative theta and positive vega isn't too big a deal. As you nicely explained in the video, the steepening of IV skew will benefit this adjustment.

    2. However, in situations when the market has gone through a long rally, while IV will be low and IV skew relatively steep, ATM will likely be on the right side of the tent or even outside the tent. Delta/theta ratio will likely be high and vega approaching neutral to positive. Therefore, we can no longer shift in the right leg as we cannot afford to add any more negative theta nor positive vega to the position. In this scenario, shifting the short strike up is more appropriate because this adjustment will add positive theta and negative vega instead.

    Thought I highlight the difference between these two adjustments.
     
    Rakesh, Gail, uwe and 6 others like this.
  10. GreenZone

    GreenZone Well-Known Member

    Fully agree with your analysis, Kevin.
     
  11. dacamon

    dacamon Member

    Great stuff Kevin and Ron. Thanks for sharing!


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  12. Jay Hattler

    Jay Hattler Well-Known Member

    Kevin,
    How do you export matrix data from OV in back trader mode?
    Jay
     
  13. Kevin Lee

    Kevin Lee Well-Known Member

    Jay,

    File - Export. Then click on Line Format button to choose whichever field you wish to download. This is an excellent OV feature.
     
  14. Kevin Lee

    Kevin Lee Well-Known Member

    Here's the screen shot

    upload_2016-1-21_2-54-37.png upload_2016-1-21_2-56-5.png
     
  15. Jay Hattler

    Jay Hattler Well-Known Member

  16. Boomer34

    Boomer34 Well-Known Member

    Great info guys...learning alot!
     
  17. marat

    marat Well-Known Member

  18. Timo

    Timo Active Member

  19. marat

    marat Well-Known Member

  20. Bryan Doyle

    Bryan Doyle Well-Known Member

    Kevin and Ron, I am new to this forum. I have been trading M3 (and sometimes BB) since 2012.

    I just want to say how impressed I am with your analysis and explanation of skew/IV here! This has been really helpful to explain what I have observed with my M3 trades.

    And I have to say in general, this is a very impressive trading forum! I have watched some of the trading group videos and read many of the historical threads. I hope to be able to contribute like some of you in the future.
     

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