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Djtux

RV charts : Volatilityhq.com Official Thread

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Hello @Djtux , I have been reading a lot in the ratio spread threats from @TrustyJules and the posts about the VolHQ ratio spread analyser. But I didn't find the answer for this question.I might be obvious, but I thing it's really important to get this right.
 
The 'Return Matrix' offers the PL matrix of call with a specific delta. 
 
My question is ; how is the PL calculated ? Is this 
 
A.   Buy the option with the selected delta on the entry day. En sell THE SAME option after the historical stock move on the exit day
B.   Compare the price off the option with the selected delta on the entry day with the price of an option with the same selected delta (so this might be another strike) on the exit day.

 

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27 minutes ago, Hielke said:

 

Hello @Djtux , I have been reading a lot in the ratio spread threats from @TrustyJules and the posts about the VolHQ ratio spread analyser. But I didn't find the answer for this question.I might be obvious, but I thing it's really important to get this right.
 
The 'Return Matrix' offers the PL matrix of call with a specific delta. 
 
My question is ; how is the PL calculated ? Is this 
 
A.   Buy the option with the selected delta on the entry day. En sell THE SAME option after the historical stock move on the exit day
B.   Compare the price off the option with the selected delta on the entry day with the price of an option with the same selected delta (so this might be another strike) on the exit day.

 

I am thinking the answer is neither. Take into account we have 4 variables that we take into account over the period Entry to Exit:

  1. price of options
  2. change in option price based on historical returns
  3. change of stock price
  4. decline of RV

 

The ratio is composed of 2 options - a short and a long position. By convention the ratio is calculated on a zero cost basis otherwise the return calculations get too complex due to variable remainder from the division. So the historic increase of each option short and long is factored in for every entry and exit date - this should include IV changes and stock price changes. We then deduct historic RV decline on the extrinsic values to ensure that we factor this component in as it affects our position in a negative sense.

Start value=0

End value =((long option price+long option price increase) - RV decline on extrinsic value of long option)-((short option price+short option price increase) - RV decline on extrinsic value of short option)

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Thx @TrustyJulesfor your quick answer. This is even more than I was asking for. My intention was to build up the questioning. Above question focussen on a single long call position.I really would like to know how this is calculated (I still think the answer might be A or B).  And I consider this a need to know before I can really understand the ratio heatmap.

 

Basicly I'm asking is the heatmap a reflection of just the changing IV ( answer B ) or does it include changing IV and price movement of the underlying ( answer A )

 

Edited by Hielke

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Then the next step would be to combine the heatmaps of the long and short option to a ratio heatmap. So if I'm understand you correctly the ratio heatmap is calculated in this way:

 

Exit value = ( Long exit price * Long number of contract ) – ( Short exit price * Short number of contracts )

 

Long exit price = Long entry price + Long PL  – RV decline on extrinsic value long option
Short exit price = Short entry price + Short PL – RV decline on extrinsic value short option
 

Edited by Hielke

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12 minutes ago, Hielke said:

Thx @TrustyJulesfor your quick answer. This is even more than I was asking for. My intention was to build up the questioning. Above question focussen on a single long call position.I really would like to know how this is calculated (I still think the answer might be A or B).  And I consider this a need to know before I can really understand the ratio heatmap.

 

Basicly I'm asking is the heatmap a reflection of just the changing IV ( answer B ) or does it include changing IV and price movement of the underlying ( answer A )

 

Sorry you confused me - there is a separate screen for the long call options. Return matrix and choose long call.

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2 hours ago, TrustyJules said:

Sorry you confused me - there is a separate screen for the long call options. Return matrix and choose long call.

That's oke, sorry if I wasn't clear, but do you know the answer to my question, about what exactly does the heatmap shows ?

Edited by Hielke

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29 minutes ago, Hielke said:

That's oke, sorry if I wasn't clear, but do you know the answer to my question, about what exactly does the heatmap shows ?

Thats for @Djtux to answer - the return tables for the call/put options were already in existence when I came up with my call ratio idea. I used them and he kindly integrated the substraction in the combined table. I havent thought to ask how the return of the option is arrived at before - I just used the data.

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22 hours ago, Hielke said:

 

Hello @Djtux , I have been reading a lot in the ratio spread threats from @TrustyJules and the posts about the VolHQ ratio spread analyser. But I didn't find the answer for this question.I might be obvious, but I thing it's really important to get this right.
 
The 'Return Matrix' offers the PL matrix of call with a specific delta. 
 
My question is ; how is the PL calculated ? Is this 
 
A.   Buy the option with the selected delta on the entry day. En sell THE SAME option after the historical stock move on the exit day
B.   Compare the price off the option with the selected delta on the entry day with the price of an option with the same selected delta (so this might be another strike) on the exit day.

 

For the 'return matrix' heatmap, it's the option A.

At the entry date, the exact options are selected (the expiries and strikes). I look at the price of those options at the entry day, and recheck the prices at the exit dates.

So it's not like in the RV chart where each day the strikes reset.

In the heatmap, when you look at a row, it's always the same option(s). You can check that by looking at the 'individual cycles', and hovering on a cell to see the expiry and strike selected.

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1 hour ago, FrankTheTank said:

Hi @Djtux

 

I am sure you are working on a lot more important stuff than this but any chance we could get T-15, T-10, T-5 put calendar median results added to the return scanner?  I am finding it very helpful for the straddles.    Thank you!

 

Yes i will add that to the todo list.

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Hello @Djtux ! As I posted on my unofficial ADBE calendar thread I really like the option of calculating RV with Median instead of Average. And because the Corona-earnings are really corrupting all charts I'd like to make some changes (here:median) in advanced settings permanently. I'd really appreciate if you could implement this possibility. Thanks!

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12 minutes ago, FrankTheTank said:

@Djtux  In the return scanner, are these median returns or average returns?   Spot checking a few they look like median returns but wanted to confirm.   Thanks.  

Correct, median. That makes the most sense i think.

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19 hours ago, rigulator said:

Hello @Djtux ! As I posted on my unofficial ADBE calendar thread I really like the option of calculating RV with Median instead of Average. And because the Corona-earnings are really corrupting all charts I'd like to make some changes (here:median) in advanced settings permanently. I'd really appreciate if you could implement this possibility. Thanks!

I think that makes sense, but it's a 'breaking' change.

Does anyone want to keep the average RV in the RV chart instead of changing the default to median ?

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2 hours ago, Djtux said:

I think that makes sense, but it's a 'breaking' change.

Does anyone want to keep the average RV in the RV chart instead of changing the default to median ?

As long as you still have the ability to switch to average I think its fine.   I was in the habit of simply excluding individual outlier cycles, so average vs median isn't a big deal to me.

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23 hours ago, FrankTheTank said:

Is the PUT Cal. RV Rise number the increase from T-20 to T-0 or from current T-X to T-0?   It looks like its from T-20 but wanted to confirm with you. 

It's neither, see https://steadyoptions.com/forums/forum/topic/3885-rv-charts-volatilityhqcom-official-thread/?do=findComment&comment=122923

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Thanks Djtux

Did you have any posts on the short ATM straddle with long strangle?  I am having trouble finding them using the search feature.   Does anyone use this?  Seems to give decent returns with less drawdown than some of the other strategies.

-are both the straddles and strangles in the same expiration (after earnings date)? 

-are they at a 1:1 ratio (one short straddle for 1 long strangle)?

 

 

image.thumb.png.bafb75d411ed891422a71ea09ad1bdef.png

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4 hours ago, FrankTheTank said:

Thanks Djtux

Did you have any posts on the short ATM straddle with long strangle?  I am having trouble finding them using the search feature.   Does anyone use this?  Seems to give decent returns with less drawdown than some of the other strategies.

-are both the straddles and strangles in the same expiration (after earnings date)? 

-are they at a 1:1 ratio (one short straddle for 1 long strangle)?

 

 

image.thumb.png.bafb75d411ed891422a71ea09ad1bdef.png

See here https://steadyoptions.com/forums/forum/topic/3885-rv-charts-volatilityhqcom-official-thread/?do=findComment&comment=135125

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Hi @Djtux

I experienced something really strange today and I am trying to figure out what went wrong with my spreadsheet.    My understanding is the calculations for the put calendars in the screener and backtest are based off of the short leg being closest after earnings and the long leg being the next monthly expiration.    So most of the earnings trades for July would have a July expiration for the short leg and the long expiration should have been the August monthly expiration.    However, the August expiration did not open up until this morning so I think the screener and the backtests were still using the next monthly expiration it could find when the data was grabbed the day before.   For example, in GS the default put calendar RV chart this morning used the 7/17 expiration for the short leg and then the October expiration as the long leg.   Now when I run the RV chart for GS it shows the July and August expiration so it seems to be okay after the latest data pull.    

1. Is my understanding correct?   It will pull in an expiration 2-3 months out for the long leg if it cannot find an earlier one available?

2. Could you please add columns to the end of the screener for expiration dates you are using for the short leg and for the long leg in the calendars?   This way we can make sure we are looking at the same data as what is being shown in the screener.

 

 

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1 hour ago, FrankTheTank said:

1. Is my understanding correct?   It will pull in an expiration 2-3 months out for the long leg if it cannot find an earlier one available?

2. Could you please add columns to the end of the screener for expiration dates you are using for the short leg and for the long leg in the calendars?   This way we can make sure we are looking at the same data as what is being shown in the screener.

1. Yes that's the only available expiries

2. Yes, i will add that to my todo list

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On 6/18/2020 at 8:12 PM, FrankTheTank said:

Could you please add columns to the end of the screener for expiration dates you are using for the short leg and for the long leg in the calendars?   This way we can make sure we are looking at the same data as what is being shown in the screener.

That's now live on the website. You will see 2 new columns in the scanner at the far right.

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