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johntsai90
Registered: Aug 2009
Posts: 33 |
11-06-09 01:37 AM
Dear all,
I have this idea to create a dispersion strategy to trade options.
I am thinking to calculate the intraday realized volatility from last 5 bars in every 30 sec, and to compare the implied volatility from either 3-month delta 25 (Call & Put average) or near month ATM (Call and Put average), all in 30 sec as well.
Which one will you think its better to compare the richness and cheapness of the options, 3-month delta 25 (Call & Put average) or near month ATM (Call & Put average)?
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Martinghoul
Registered: Jan 2009
Posts: 1276 |
11-06-09 09:02 AM
Quote from johntsai90:
sorry, the underlying is index.
why do you think its not working? any reasons, or its just from your experiences
You won't be able to observe things moving this fast, IMHO...
BTW, I also don't quite understand what this has to do with dispersion.
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MTE
Registered: Jan 2005
Posts: 2648 |
11-06-09 10:06 AM
This is NOT a dispersion. A dispersion is when you trade the volatility of the index vs the volatility of the components.
Comparing realized volatility over the past 2.5 minutes vs implied doesn't sound like a viable strategy. The slippage would kill ya.
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xflat2186
Registered: Jun 2007
Posts: 1434 |
11-06-09 05:23 PM
Quote from MTE:
This is NOT a dispersion. A dispersion is when you trade the volatility of the index vs the volatility of the components.
Comparing realized volatility over the past 2.5 minutes vs implied doesn't sound like a viable strategy. The slippage would kill ya.
I am with MTE here, dispersion is trading options on the index vs options on the components, the bid offer spread in all of the calculations you want to do would make your data inaccurate.
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