SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

Recommended Posts

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.

Share on other sites
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)

Share on other sites
Posted (edited)

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

Share on other sites
Posted (edited)

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

Share on other sites
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.

Share on other sites
Posted (edited)
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

Share on other sites
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.

Share on other sites
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.

Share on other sites

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!

Share on other sites
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.

Share on other sites

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!

Share on other sites

@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.

Share on other sites
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.

Share on other sites
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 ?

Share on other sites

My thoughts were more like being able to save personal settings permanently. I didn't intend to force my preferred setting for all users.

Share on other sites

My vote is for median for all charts.   Average is nice to swap to but one huge positive or negative move can distort the average line whereas median seems more robust.

Share on other sites
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.

Share on other sites

You can probably guess that I'm a big fan of medians in small sample sizes 😁

Share on other sites
Posted (edited)

I like averages as we can exclude the outliers if we wish.

Edited by porgie

Share on other sites

@Djtux  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.

Share on other sites
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.

Share on other sites

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)?

Share on other sites
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)?

Share on other sites

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.

Share on other sites
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

Share on other sites

You are the best.  Thank you.

Share on other sites
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.

Share on other sites

Thanks you.  That will be very helpful.

Share on other sites

There are some issue with the website right now as a data provider changed their format and that is causing some issues.

I'm working on it, sorry about that.

Share on other sites
12 hours ago, Djtux said:

There are some issue with the website right now as a data provider changed their format and that is causing some issues.

I'm working on it, sorry about that.

Just fyi, I fixed the issue earlier today.

Share on other sites
Posted (edited)

10 hours ago, Yowster said:

but the whole point of my comment was that right now, in this market climate, we are seeing many cases of things not following RV patterns of prior cycles... backtests will only show how they are behaving during mostly more normal times so I'm not sure how such tests will confirm anything related to what we are seeing right now?    I am merely stating what I have observed over the last week or so with the earnings straddle RV behavior, particularly as we get down to the last few days prior to earnings.    So, I'm not proposing anything that applies to more normal market times, I'm just accepting what has been happening recently and trying to pick setups which have a better chance of working, even if RV drops.  For example, lets take 2 stocks that both have earnings coming up  - PG is a lower IV stock and XLNX is a higher IV stock.  They both have a tendency for RV rise on T-0, and they both have virtually identical 1-day avg straddle performance of ~10% over the last two years.   Today, PG stock moved by \$1.50 (1.2%), the straddle gamma gains for a \$1.50-\$2.00 stock price move are around ~10%.   XLNX moved by \$2.00 (1.9%) today yet the straddle gains for such movement are ~4% in one direction and ~1% in the other.   So, given the same magnitude stock price movement we saw today, PG will be in much better shape if RV happens to decline.

Hi Dustin,

As discussed by Yowster in this thread: https://steadyoptions.com/forums/forum/topic/6514-uber-pre-earnings-straddle-idea/ there is a question about whether market dynamics during this earnings cycle are departing from the dynamics generally observed in past cycles.

I was wondering if your data could be configured to cast some light on the question. Would it be possible make a display of the straddle RV charts and tables done in aggregate for each earnings cycle? So, instead of displaying the results of one stock across 8 cycles we might see the results (and mean/median) of all optionable stocks over a given cycle? Ideally, could this be filterable so that one could select the price range, IV range, HV range, VIX range, industry, sector & availability of weekly options for a subset of the data?

And ... could it be possible to then do a meta study of past cycles and the current cycle in comparison with each other? Again ideally with the same dataset filter capabilities?

I know it's a bit of an ask, but looking at the information in ways like this could provide some insight on the degree to which a current cycle is matching previous patterns, and which groups of stocks are experiencing changes, and how that might suggest which strategies are likely to work best in the current environment.

Thanks for anything you can produce, and my appreciation for having built such a valuable analytical tool. It's well worth the fee you charge for it.

Edited by YVRFlyGuy

Share on other sites
5 hours ago, YVRFlyGuy said:

Dustin

That's actually another member, not me !

5 hours ago, YVRFlyGuy said:

So, instead of displaying the results of one stock across 8 cycles we might see the results (and mean/median) of all optionable stocks over a given cycle? Ideally, could this be filterable so that one could select the price range, IV range, HV range, VIX range, ind﻿ustry, sector & availability of weekly options for a subset of the data?

Hum, that sounds like a lot of work 😅. I'm not even sure how to group together different stocks into the same 'earning cycle' as they all report at different dates.

Share on other sites
Posted (edited)
4 hours ago, Djtux said:

That's actually another member, not me !

4 hours ago, Djtux said:

Hum, that sounds like a lot of work 😅. I'm not even sure how to group together different stocks into the same 'earning cycle' as they all report at different dates.

My initial thought was by dividing things up by quarters, Jan-Mar, Apr-Jun, Jul-Sep & Oct-Dec. The majority of companies report after AA and AA usually reports 2-3 weeks after the start of each of those quarters. There would probably be a few companies that would flip/flop back and forth over those quarter ends, but probably not very many, and if you were to assign cycle numbers by doing a backwards count with the present quarter (Jul 1 - Sep 30) as cycle 0 and then assigning each previous report to cycles 1, 2, 3, ... etc they would probably group fairly well. There might be a few instances of forced early reports due to material changes that would end up being outside of the defined quarter parameters but I doubt it would be many or that they would have much effect on the broader picture.

From some other trades I've done in the past I found that each season can have its own flavour and that a trade that was wildly successful in the previous season can turn stone cold the next. This may be what is being observed with the number of instances of straddle RVs that historically have maintained value over the last few days to earnings but which seem not to be following that pattern this time. Being able to observe that effect as it becomes quantifiable over a growing number of reports as each quarter develops could help inform decisions about how to allocate to RV related strategies that appear to be running hotter or colder than normal.

Should be a piece of cake, right 🙃!

Edited by YVRFlyGuy

Share on other sites
12 hours ago, YVRFlyGuy said:

My initial thought was by dividing things up by quarters, Jan-Mar, Apr-Jun, Jul-Sep & Oct-Dec. The majority of companies report after AA and AA usually reports 2-3 weeks after the start of each of those quarters. There would probably be a few companies that would flip/flop back and forth over those quarter ends, but probably not very many, and if you were to assign cycle numbers by doing a backwards count with the present quarter (Jul 1 - Sep 30) as cycle 0 and then assigning each previous report to cycles 1, 2, 3, ... etc they would probably group fairly well. There might be a few instances of forced early reports d﻿ue to material changes that would end up being outside of the defined quarter parameters but I doubt it would be many or that they would have much effect on the broader picture.

Im all for this as it would be interesting to see but I think @Djtux has about a dozen more urgent things going on right now  (like changing average returns to median returns in the scanner hint hint

I wish we had the data to be able to run these tests on our own.  I think there is even a pattern between the day of the week a stock reports.  Especially for some of my strategies where we hold through earnings.  For example, trades opened on a Thursday with an expiration the next day on Friday behave a lot differently then trades opened on Monday and closed on Tuesday.   I am sure some hedge funds and MMs have all this data and use it against me

Share on other sites

Hi! @Djtux,

Brand new user here!

First of all, thank you and congratulations for the great tool you developed. Much appreciated.

Then, I am very picky with bugs, so I guess I would start reporting the first one I noticed...

X-axis labels are overlapping at default settings for the IV chart:

Share on other sites

Now, a couple features request:

1. For the RV charts, would it be possible include a check box for each cycle, so we can disable outliers that would influence the average calculation?

It would work similarly to what is available on ToS Earnings tab:

2. Could you allow us to select how many days post earnings we want to draw? This would be helpful on other trades strategies that we would hold after earnings and profit on IV crush. This would be applicable for the RV charts and return matrix (exit day).

You can limit it to like 10 days or so, as applicable, but at least a week could be useful.

Thank you!

Share on other sites

BTW, I just learned that I can disable a line on the graph by clicking on it! 😁

But, it does not seem to change the average line calculation.

So, would it be possible to have that to change according to the lines/cycles shown/selected?

Thank you again.

Share on other sites

Hi! @Djtux,

Brand new user here!

First of all, thank you and congratulations for the great tool you developed. Much appreciated.

Then, I am very picky with bugs, so I guess I would start reporting the first one I noticed...

X-axis labels are overlapping at default settings for the IV chart:

Thanks for taking the time to report the bug. The IV chart x-axis is bugged. That's new, i will have to investigate, probably something changed in the library i use to display the charts.

For the RV charts, would it be possible include a check box for each cycle, so we can disable outliers that would influence the average calculation?

In the RV chart page, if you click on the "Advanced Options", you can select the cycles you want to ignore then click "Run backtest" and the average RV line will be recalculated :

Could you allow us to select how many days post earnings we want to draw? This would be helpful on other trades strategies that we would hold after earnings and profit on IV crush. This would be applicable for the RV charts and return matrix (exit day).

You can limit it to like 10 days or so, as applicable, but at least a week could be useful.

Would it be ok if it's a separate page for the RV chart ? I would prefer not to make the RV chart pages more complicated than it is right now.

For the return matrix, that could be done with a flag to display "before earnings" or "after earnings". I prefer that to avoid having a giant unreadable matrix.

I can add all that to my very long todo list, so please be patient.

Share on other sites

BTW, I just learned that I can disable a line on the graph by clicking on it! 😁

But, it does not seem to change the average line calculation.

So, would it be possible to have that to change according to the lines/cycles shown/selected?

Thank you again.

Yes clicking the line in the chart only hides it, but does not trigger the average/median RV line. It's a technical limitation that i have for now, you need to go to the "Advanced Options" to select the cycles you want to ignore.

Share on other sites

Thanks for the prompt feedback, @Djtux!

Yes, a separate page on RV charts would be fine, or you can just add an advanced options for how many day to plot after earnings.

And, Thank you for the advanced options tip, I hadn't realized that was the actual function of that list. Should have played with it.

Share on other sites
Posted (edited)

Hi! @Djtux,

Another one for your long list:

If feasible, cloud you include  an option to show daily IV on the IV chart along with the IV30 and HV30?

Thank you!

Share on other sites

@Djtux Minor bug... sometimes on the Straddle Table you have a stock where the bar charts are compressed together in a tiny bar.    FB is like that now....

Share on other sites

If feasible, cloud you include  an option to show daily IV on the IV chart along with the IV30 and HV30?

What is the definition of the daily IV ? Is it a 1-day implied volatility ? If so, the problem is that there is usualy no 1 day expiry option, so it's mostly an extrapolated value.

There is usually 2 expiries around the 30 day expiry, so the 30 day IV is most "robust".

Share on other sites
14 minutes ago, Yowster said:

@Djtux Minor bug... sometimes on the Straddle Table you have a stock where the bar charts are compressed together in a tiny bar.    FB is like that now....

I noticed that an hour ago. That's due to FB changed its confirmed earning date.

I have to notify my data provider.

Quote

Facebook Reschedules Release of Second Quarter 2020 Financial Results and Conference Call

MENLO PARK, Calif., July 27, 2020 /PRNewswire/ -- Facebook, Inc. (NASDAQ: FB) announced today that it has changed the date it will release the company's second quarter 2020 financial results and hold its conference call due to a scheduling conflict. Facebook will release its financial results after market close on Thursday, July 30, 2020 and will hold its conference call at 3 p.m. PT/ 6 p.m. ET on that day. Facebook's founder and CEO is scheduled to provide testimony before The House Judiciary Committee on July 29, 2020.

Share on other sites
2 minutes ago, Djtux said:

What is the definition of the daily IV ? Is it a 1-day implied volatility ? If so, the problem is that there is usualy no 1 day expiry option, so it's mostly an extrapolated value.

There is usually 2 expiries around the 30 day expiry, so the 30 day IV is most "robust".

I see, that is a subject not very clear to me, as I don't have much experience with options.

I see lots of IV(s) everywhere, but usually it is not clear how they are calculated or what they represent.

I.e.: intraday x daily IV on ToS.

Would ToS daily IV actually be IV30?

Share on other sites
Posted (edited)
9 hours ago, FrankTheTank said:

Im all for this as it would be interesting to see but I think @Djtux has about a dozen more urgent things going on right now  (like changing average returns to median returns in the scanner hint hint

I wish we had the data to be able to run these tests on our own.  I think there is even a pattern between the day of the week a stock reports.  Especially for some of my strategies where we hold through earnings.  For example, trades opened on a Thursday with an expiration the next day on Friday behave a lot differently then trades opened on Monday and closed on Tuesday.   I am sure some hedge funds and MMs have all this data and use it against me

Edited by YVRFlyGuy
Error post

Share on other sites
4 hours ago, Djtux said:

I noticed that an hour ago. That's due to FB changed its confirmed earning date.

I have to notify my data provider.

That should be fixed.

Share on other sites
Posted (edited)

@Djtux - can you still do the \$49.99 price for SO members?   FYI I signed in, and got:

but the View details links is not responding, and the Start now goes to \$99.99.

Share on other sites

@Djtux - can you still do the \$49.99 price for SO members?   FYI I signed in, and got:

but the View details links is not responding, and the Start now goes to \$99.99.

Use the 50% coupon on the first post of this thread (or follow my signature).

Share on other sites

@Djtux  Thanks for adding in the median RV to the scanner.  Much appreciated!

Create an account

Register a new account