Mark
Bill
To: OptionClub@yahoogroups.com
From: mark@option911.com
Date: Thu, 8 Jul 2010 13:59:31 -0500
Subject: RE: [TheOptionClub.com] Evaluating implied volatility
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To: OptionClub@yahoogro
From: mark@option911.
Date: Thu, 8 Jul 2010 13:59:31 -0500
Subject: RE: [TheOptionClub.
Bill,
There is a major misconception that traders should only buy calendars when IV is in the bottom third of IV, or if Vol is low, yada yada yada. I think you should take some time to look into how the term structure of options works. Understanding the inter-relationships of the months is a better place to start than general IV as a whole.
Mark
From: OptionClub@yahoogro
Sent: Wednesday, July 07, 2010 11:03 AM
To: OptionClub@yahoogro
Subject: [TheOptionClub.
When putting on a non-directional trade I assess (i.e. "guess") the probability that iV will go up or down. I have read and heard various pieces of advice on this, such as "look at the last two years, and make sure iV is in the bottom third." I realize that I really don't follow any of these guidelines. The reason is that a) my time horizon is measured in a few weeks, so I am really interested in recent behavior, b) if you take an example (I'm looking at RUT right now) the characteristics of the iV line has changed radically over the last two years. In late 2008 it looked like the Himalayas. Then there was a gradual downslope through 2009. Since May this year it has been choppy, with a high of about 38 and a low of just under 20.
My impression is that unless you trade "campaign calendars", where your long is out a few months, local iV behavior - the last couple of months, maybe, is what you ought to be looking at.
Does anyone have a view on this that they have found to work reasonably well?
Bill
My impression is that unless you trade "campaign calendars", where your long is out a few months, local iV behavior - the last couple of months, maybe, is what you ought to be looking at.
Does anyone have a view on this that they have found to work reasonably well?
Bill
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