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On 7/30/2020 at 2:48 PM, UserNameNotFound said:

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:

image.png

I fixed this bug.

15 minutes ago, FrankTheTank said:

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

The median is now the default in the RV charts, and in the scanner columns.

You can change the median to average in the RV charts under the "advanced options".

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1 hour ago, Djtux said:

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

Thanks, I used the link there (first page), and signed in, and got that.  HOWEVER, clicking on the link a second time, this time "signed in", it did bring me to the discount page.

So thanks, I'm all good.

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3 hours ago, FrankTheTank said:

@Djtux  Not a huge deal but I suspect some of the WMT put calendar backtest data is messed up and its throwing off the heat map chats like this.  Wondering if you could look at the data on your end to see whats wrong. 

I think it's because of the large spread in the EOD data for WMT.

image.png

If i compare the data with what is displayed in ThinkOrSwim Thinkback, i get the same put calendar price (0.28 and 1.28).

Some of the legs have very wide spreads at the EOD (16:00), not sure if it's better at 15:45 or not.

image.png

image.png

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If anyone has a moment, I would be interested in their thoughts about straddle RV on the underlying KEYS for this earnings. Its as low as it has ever been and yet straddle IV is almost as high as ever. I'm struggling to join the dots as to how RV would be so low and thought I might not be reading the charts correctly.

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1 hour ago, Jasper said:

If anyone has a moment, I would be interested in their thoughts about straddle RV on the underlying KEYS for this earnings. Its as low as it has ever been and yet straddle IV is almost as high as ever. I'm struggling to join the dots as to how RV would be so low and thought I might not be reading the charts correctly.

Looks interesting.  Not sure why straddle RV is so low.  I found this about past average moves

image.png

 

The 97.5 straddle has been dropping in price and I calculate a 6.8% RV.   Looks like RV picks up the last few days so maybe keep your eye on it or leg into small trades with the hope you get an RV boost the last few days? 

 

image.png

 

 

Edited by FrankTheTank

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2 hours ago, Jasper said:

If anyone has a moment, I would be interested in their thoughts about straddle RV on the underlying KEYS for this earnings. Its as low as it has ever been and yet straddle IV is almost as high as ever. I'm struggling to join the dots as to how RV would be so low and thought I might not be reading the charts correctly.

Took a look and it was strange but the reason is the number of weeks between the earning date and the expiry.

There are no weeklies, and you can see that the number of weeks between the earning date and the expiry is not the same between cycles, so that's why this cycle it seems "cheap".

image.png

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8 minutes ago, Djtux said:

Took a look and it was strange but the reason is the number of weeks between the earning date and the expiry.

There are no weeklies, and you can see that the number of weeks between the earning date and the expiry is not the same between cycles, so that's why this cycle it seems "cheap".

image.png

I am embarrassed that I did not consider that.   Thank you for pointing it out.   Is there a way to "normalize" the data based on the typical time to earnings event or is this a rare case?   I am worried that what I have been considering to be a "cheap" straddle is just an artifact of the time to earnings.   

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1 hour ago, FrankTheTank said:

 Is there a way to "normalize" the data based on the typical time to earnings event or is this a rare case?

Taking a stab: the straddle approximation formula gives the price of a perfectly ATM straddle as 

 

[1/2000 x UnderlyingPrice x avg IV of put+call x squareroot(DTE) ]

 

Which would imply that RV is the same formula with the underlying price removed (ie divide S.A.F. by underlying price).

[1/2000  x avg IV of long straddle put+call x squareroot(DTE)]

 

If you've got the IV for t and the DTE for each cycle (which you can work out from 3w vs this week + Friday expiry) you should be able to manually calculate RV of a perfectly ATM straddle.

 

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Thanks everyone for taking a look. Main take aways for me are -

  • check whether the underlying has weeklies. Maybe when they don't, instead of displaying when they came in, it could state that they only have monthly option expiries; and
  • manually scan the list of earnings cycles to see whether there are any outliers with regards to duration between options expiry and earnings that could affect the plots on the charts. 

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@Djtux  do you track the average or median time interval between earnings date and expiration date as a field in your database?  If so, would it be easy to add that as a new column at the end of the scanner?    No big deal if its hard but if its something you already have that would be useful to see as we can setup a "red flag" or warning if the current cycle is far outside of the average like in the KEYS example above.  

Thanks

 

 

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On 8/11/2020 at 8:52 AM, FrankTheTank said:

Is there a way to "normalize" the data based on the typical time to earnings event or is this a rare case?

That some potential research to do. As i rule, i prefer to keep things simple and not do too much models and approximations. For the KEYS example, i would just go to the next candidate.

23 hours ago, gf58 said:

Taking a stab: the straddle approximation formula gives the price of a perfectly ATM straddle as 

 

[1/2000 x UnderlyingPrice x avg IV of put+call x squareroot(DTE) ]

 

Which would imply that RV is the same formula with the underlying price removed (ie divide S.A.F. by underlying price).

[1/2000  x avg IV of long straddle put+call x squareroot(DTE)]

 

If you've got the IV for t and the DTE for each cycle (which you can work out from 3w vs this week + Friday expiry) you should be able to manually calculate RV of a perfectly ATM straddle.

 

That's interesting. There will be another approximation : The IV for a 3 weeks ATM option is not the same as the IV for the 1 week ATM option. So you need to extrapolate on the short end and that also introduces some approximations.

23 minutes ago, FrankTheTank said:

@Djtux  do you track the average or median time interval between earnings date and expiration date as a field in your database?  If so, would it be easy to add that as a new column at the end of the scanner?    No big deal if its hard but if its something you already have that would be useful to see as we can setup a "red flag" or warning if the current cycle is far outside of the average like in the KEYS example above.  

Thanks

I don't have that, but there is a column to say if the stock has weeklies or not. 

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1 hour ago, Djtux said:

There will be another approximation : The IV for a 3 weeks ATM option is not the same as the IV for the 1 week ATM option. So you need to extrapolate on the short end and that also introduces some approximations.

Good point. That does make it a little tougher to estimate (but I suppose not completely impossible).

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@Djtux  This is not urgent but if you already have the date when weeklies were introduced in your database can you add that as a column to the end of the scanner?   That would help me create a warning or "red flag" when I download the data and create my own queries.


Thanks!

 

 

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On 8/13/2020 at 7:41 AM, FrankTheTank said:

This is not urgent but if you already have the date when weeklies were introduced in your database can you add that as a column to the end of the scanner?   That would help me create a warning or "red flag" when I download the data and create my own queries.

Ok, i've added that to my todo list.

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2 minutes ago, FrankTheTank said:

In the IV chart, i have not displayed the expiration date. You only see the 'earning date' (more accurately it's the last trading day before the announcement).

In the RV chart, you can see the expiries :

 image.png

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2 minutes ago, Djtux said:

In the IV chart, i have not displayed the expiration date. You only see the 'earning date' (more accurately it's the last trading day before the announcement).

In the RV chart, you can see the expiries :

 image.png

Okay thanks.   Below the IV charts there is an IV Diff % chart.  Is this the short leg IV subtracted from the long leg IV?

image.png

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Also, in this chart the long leg is supposed to be after earnings (September 4th leg):

https://www.volatilityhq.com/backtester/calendar/?symbol=ZM&start_date=2018-08-20&option_type=Put&short_leg_type=Before&nbweeks=1&average_or_median=median&force_monthly=No&show_stock_diff=&reference_t=&current_cycle_offset=0&min_t=&submit=Run+backtest

But the IV chart for the long is only showing a small IV which I don't think is accurate.   Here is the chart for the long from that link:

image.png

 

If I swap this around to have that same September 4 leg be the short leg the IV chart looks like this

image.png

This looks more accurate for the earnings expiration leg.

 

Maybe I am reading it wrong but if they are both the same legs those two charts should match and should probably look like the second chart with the huge 100 pt IV rise.  

 

*BTW - THANK YOU for making these IV charts.  I don't know of any other site that lets you see IV between legs like this.   Its very valuable.  

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10 minutes ago, FrankTheTank said:

Below the IV charts there is an IV Diff % chart.  Is this the short leg IV subtracted from the long leg IV?

Yes it's just the short leg IV - long leg IV.

I'm not sure how to use them to be honest, i just added them early on and never touched them.

7 minutes ago, FrankTheTank said:

Maybe I am reading it wrong but if they are both the same legs those two charts should match and should probably look like the second chart with the huge 100 pt IV rise.  

I took a look. The difference is the scale of the y-axis. If you recenter the 2nd chart, you will see it's the same :

image.png

image.png

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The Steady Options website itself is the best tool.  Historical trades going back 9 years, lots to read.  One of the chart subscriptions is the next best for recognizing good entry points, there are two of them.  If you are a complete beginner you need nothing else.  Read up and paper trade until you get the mechanics down pat.  Follow the trades as they are presented. After awhile, if you are the analytical type consider One for analyzing and setting up your own trades.  I would imagine it would take months to be proficient enough to bother with that being a beginner.  There are plenty of official and unofficial trades to follow.  Don't try and get into any unofficial trades unless you fully understand them.  The official trades are fully vetted but you still need to know the mechanics of building the trade as well as a basic understanding.  Good Luck.

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7 hours ago, Ringandpinion said:

I hate asking questions that make me look stupid (or more stupid) but what are the blue dashed lines on the RV and RV% charts?  Average RV?  Today's RV?  I'm sure it's obvious, but for some reason it doesn't click.

The horizontal blue dashed lines?   If so, these are meant to simulate where the RV would be if you were able to sell strangles to reduce the cost of the straddle (i.e. the hedged straddle).   I think the default is set at a 5.5% or 6% credit (you can check by opening up the Advanced Options - see image).

 

I was confused at first on how this was calculated as I thought it was looking at actual strangle prices for each option but its not that sophisticated (sorry djtux), rather, it just takes a straight X% deduction for each week where you can sell a strangle  and it plots the blue dashed line at that new adjusted RV level.

 

If its a low IV stock and the blue dashed line is below most of the RV lines at T+0 than that usually means its a good candidate to sell a hedged straddle but then you have to really look at the option chain to see how much credit you can get and how far out the wings are.   

 

image.png

Edited by FrankTheTank

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Another question: When looking at the RV charts or the heat map, are the farther entry dates (such as T-25) based on the front expiration or the expiration immediately after the earnings date?

I realize the IV wouldn't rise in the more predictable fashion expected if it was not the first expiry past the earnings date, but I've made stupid assumptions before.

Edited by Ringandpinion

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13 hours ago, Ringandpinion said:

Another question: When looking at the RV charts or the heat map, are the farther entry dates (such as T-25) based on the front expiration or the expiration immediately after the earnings date?

I realize the IV wouldn't rise in the more predictable fashion expected if it was not the first expiry past the earnings date, but I've made stupid assumptions before.

Assume you are talking about straddles?   It should always be the expiration immediately after earnings.   However, there is a major problem/flaw when you are looking that far out (more than T-10). In real-time the earnings dates are not always announced that far out.   So you may see a beautiful looking backtest or RV chart at T-15 but in reality you would never be able to trade that because you may not know when the confirmed earnings date would be.

LULU is the perfect example, they only announced their upcoming Sept 8, 2020 earnings date on August 25 (two weeks before earnings).   So anything on the backtest or RV chart prior to T-10 is misleading and dangerous.    Not sure if there is a way to show that but its something I have learned the hard way.   

 

 

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3 minutes ago, Ringandpinion said:

This is probably operator error, but this symbol shows T-19 but the earnings is 28 days out.  I checked a couple of others just to see if I was doing anything wrong but they all read the proper time to earnings.

It's 19 trading days. Holidays and weekends don't count. There is labor day in September to remember as well.

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@Djtux, the site is showing both September 22 and September 29 as "confirmed" earnings dates for NKE (sources #1 and #6 for Sept 22 ;source #4 for Sept 29). The actual earnings date is Sept 22, according to NIke's recent press release on their IR website (https://investors.nike.com/investors/news-events-and-reports/investor-news/investor-news-details/2020/NIKE-Inc.-Announces-First-Quarter-Fiscal-2021-Earnings-and-Conference-Call/default.aspx). Is there a reason why Sept 29 would be showing as a confirmed earnings date? 

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13 minutes ago, DubMcDub said:

Is there a reason why Sept 29 would be showing as a confirmed earnings date? 

That provider made a mistake, and i don't know what would be the reason.

This is why i included several sources to cross-check each other.

The RV chart picks up the Sept 22th fortunately.

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Just now, Djtux said:

That provider made a mistake, and i don't know what would be the reason.

This is why i included several sources to cross-check each other.

The RV chart picks up the Sept 22th fortunately.

Understood.

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3 minutes ago, Ringandpinion said:

How to question: Is it possible to change the earnings date offset on the Return Matrix similar to the Straddle RV?

Do you mean in the backtest matrix table?    Not sure why you would need to.  Can you clarify more?

 

 

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24 minutes ago, FrankTheTank said:

Do you mean in the backtest matrix table?    Not sure why you would need to.  Can you clarify more?

 

 

Yeah, specifically the tab marked "Return Matrix" and you set it to ATM straddle, or I do.  I was eyeballing MSFT and have conflicting unconfirmed earnings dates, so I wanted to adjust it +5 like I did on the Straddle RV tab.  I didn't really think there was a way to adjust it but thought I'd ask.

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1 hour ago, Ringandpinion said:

Yeah, specifically the tab marked "Return Matrix" and you set it to ATM straddle, or I do.  I was eyeballing MSFT and have conflicting unconfirmed earnings dates, so I wanted to adjust it +5 like I did on the Straddle RV tab.  I didn't really think there was a way to adjust it but thought I'd ask.

I dont think you need to actually need to adjust the date.  If you are uncertain of the date I would just 'eyeball' the returns around the entry date on the left side.   For example, MSFT is expected to be at T-11 right now (circled in red in the image below).   To see what the returns look like +/-  five days just look at T-16 and T-6 .

 

image.png

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8 hours ago, FrankTheTank said:

I dont think you need to actually need to adjust the date.  If you are uncertain of the date I would just 'eyeball' the returns around the entry date on the left side.   For example, MSFT is expected to be at T-11 right now (circled in red in the image below).   To see what the returns look like +/-  five days just look at T-16 and T-6 .

Thanks, again.  You can see how bad I am at understanding this backtesting.  I was thinking the change in date would result in a completely different data set, but, since this earnings cycle isn't really involved, then just the distance to the earnings date matters.  Doh!!

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25 minutes ago, FrankTheTank said:

@Djtux

When you updated everything to display median returns instead of average, did you also change it for the Return Scanner report or is this still showing average returns?   Thanks!

 

image.png

That was already using the median by default.

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On 10/11/2020 at 11:31 AM, TrustyJules said:

@Djtux I tried TEAM in the ratio calculator but get no results. Is that because there arent enough iterations before with weeklies? The same happens with WIRE.

 

 

Yes it's strange, i took a look, it seems there it's because of some issues with the data i got from last friday. I'm looking into it.

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