Oz Options-Volatility Analysis

[sails]

Happytrader, it depends... If timing doesn't matter (eg a neutral strategy such as a iron condor, butterfly, etc), I prefer to wait for the last half hour when there is the most liquidity. Otherwise directional triggers could be anytime during the day.

I often get often good directional entries/exits in the first half hour or so, but unfortunately some of our option MM's seem to have trouble getting out of bed and don't start giving continuous quotes until they are ready. The worst I have seen is CBA with no MM quotes until 45 mins after opening - sorry, just my vent

Cheers
Margaret.

 

[happytrader]

Happytrader, it depends... If timing doesn't matter (eg a neutral strategy such as a iron condor, butterfly, etc), I prefer to wait for the last half hour when there is the most liquidity. Otherwise directional triggers could be anytime during the day.

I often get often good directional entries/exits in the first half hour or so, but unfortunately some of our option MM's seem to have trouble getting out of bed and don't start giving continuous quotes until they are ready. The worst I have seen is CBA with no MM quotes until 45 mins after opening - sorry, just my vent

Cheers
Margaret.

Thanks for that Margaret. I trade along very similar lines myself. Just thought it might be useful information for beginners contemplating trading derivatives. I remember being told 'time in the market is everything' and also that old favourite, 'the amateurs open the market and the professionals close it' I've found that to be pretty true most of the time for directional trades. Yes I agree with your comments about some of the MM habits. Never mind if you're right your right. They just annoy me when I'm trying to sell quickly.

Cheers
Happytrader

 

[wayneL]

HT,

Re trading times: I concur with what sails and you have discussed.

I have found even if the stock takes off with a fast move in the morning, a trade I would normally take with a stock, the delightfull MM's will screw you with price. So normally wait till at least the first hour is gone (amatuer hour).

Sails,

some of our option MM's seem to have trouble getting out of bed

This is something, that at the moment, I have a great deal of empathy with. LOL

The opening bell is 6:50 AM (cause I trade SPI as well) here in the west. Most inconvenient :eek3:

 

[wayneL]

Hello
The IV that you have on the chart, how is it created?
Is it the average IV of all calls, or puts and calls, or the IV of just 1 series?
Is that metastock? If it is, how do you go getting the dates to line up in 2 different charts?
In Tradestation data can be charted in an indicator window on the 1 chart.
Thanks Steve

Steve,

It is an average across ATM/Close to money options and several expiries.

The data is, as far as Metacrash is concerned, a separate security. AMP verses AMP.iv for instance. You use the Insert/Security command and select the matching IV, drag it down to a new window and VOILA!

Be prepared for :aufreg: I crashed metacrap several times setting up the various charts.

 

[wayneL]

AMP has entered the lower quartile of it's 200 day IV range

Could be a Good op for some gamma trading or bought put? (I'm sceptical of the longside)

 

[wayneL]

Whats the deal with the strange AMP strikes?

<edit - never mind, I found the answer >

http://www.asx.com.au/investor/pdf/notices/2006/Clm03106.pdf

 

[wayneL]

Just for fun, lets try some gamma trading (paper) on AMP

Buy AMPBY/AMPBX straddle @ the ask of 44c ($8.48 march straddle)

Chose the front month to get maximum gamma.

 

[wayneL]

Just for fun, lets try some gamma trading (paper) on AMP

Buy AMPBY/AMPBX straddle @ the ask of 44c ($8.48 march straddle)

Chose the front month to get maximum gamma.

It's all coming back to me what bastids these Aussie MM's are.

I was also looking at the april straddle as we are long vega as well as gamma...and with IV "purportedly" low....

The put quotes reeked of MM b@stardry, and sure enough they have them priced @ 26-28%.

This war!!!!!! LOL

 

[sails]

The put quotes reeked of MM b@stardry, and sure enough they have them priced @ 26-28%.

This war!!!!!! LOL

don't often defend the MM's, but AMP goes ex-div on 27th March paying a div of 18c just 3 days before March expiry.

 

[wayneL]

don't often defend the MM's, but AMP goes ex-div on 27th March paying a div of 18c just 3 days before March expiry.

Ah yes, thanks Margaret. Haven't been playing dividend paying stocks in the US, so neglected to consider. Will have to remember to consider that.

Thats why I'm dummy trading (it could be argued by some that that what I've always been doing ), a new learning curve for me.

Thanks for picking that up.

Cheers

PS It's still war!!!

 

[wayneL]

don't often defend the MM's, but AMP goes ex-div on 27th March paying a div of 18c just 3 days before March expiry.

Yes that brings it back into line. ~20%IV Thanks again.

 

[sails]

Hi Wayne,
Just wondering if you have done any IV/SV charts on BHP. It's prone to overnight gaps much like NWS and IV's are currently running close to yearly highs which makes sense with the recent down moves. Would be interesting to see some IV/SV history if it's not too much trouble.
Thanks,
Margaret.

 

[wayneL]

Margaret,

Here is a 1yr chart.

I'm still fooling with my template, so a little explanation

IV is plotted in the lower pane in black with it's six month range in grey

22 day SV is plotted in both panes in red

10 day SV is in the upper pane, the green dashed line

100 day SV in pink

22 day SV has been oscillating in a fairly textbook channel whilst IV has been making higher highs, only in this latest peak has IV actually risen to the level of SV highs.

I will leave interpretation to you (I am suffering from the aftereffects of a particularly good weekend )

Cheers

<EDIT> chart has been corrected

 

[sails]

Thanks Wayne - will take some time to study these charts . SV really whips wildly around IV levels - probably explains why I've found it difficult to find the most suitable option strategies for BHP. I'll do some backtesting on the basis of your charts and see what I come up with. Will take a while as I have to do this manually and might give you time to recover from your weekend!

 

[wayneL]

SV really whips wildly around IV levels -

Yes, and this is what I am having to get used to. In the US the opposite is true. IV levels tend to whip around more than SV.