Atticus, I was wondering if you might speak about your approach for forecasting volatility on a single stock? I personally mainly trade instruments that are affected by macro economics and macro events, so those likelihoods are what are in my mind when getting an idea of where volatility should be.
My biggest single-name spec is in the weekly AAPL 610 long calendar. I'd imagine it's looking good here. Long delta in RUT and SPX.
Sorry, I can't really get into that. Other than to say one account gets long or short vol on macro events (storms included).
I am not in the remotest sense a quant. I run one off the shelf macro model that was developed in the late 80s (not by me). in vanilla I run approximations which give me a dollar value to skew in index and component vol. I also have that PF sheet which I watch intraday. I run var figures on each issue I trade and GARCH as well. I infer a flat skew vol-figure (implied ATM) from var and calc distribution points (INTERNAL touch prob of hitting these 1/2/3 sigma "hedge" levels), or what I feel is the "stickiness" of the underlying, or a forward var figure. If I get a feel that the underlying is sticky I will go heavily into short vol. I use Kelly for bet-sizing but will override that. I wrote something on another thread and I'll try to find it now. OK, I found a reply to the post I am referring to: http://www.elitetrader.com/vb/showthread.php?s=&postid=3514858&highlight=atticus#post3514858 This thread is not indicative of my concentration in flies or calendars.
She handed me stickers that say "gas was 1.89 when Obama got into office" to put on gas pumps..... thats all i can get out of her these days.
Thanks atticus. Really appreciate this. It will take me some time to decode (a small piece of) this info. So you use the flies to estimate skew and kurtosis and calendars for the term structure? Just fwiw I am experimenting with "model free" IV, skew and kurtosis, I got the Excel functions for those from this book: Option Pricing Models and Volatility Using Excel-VBA (Wiley)
Right I run the marked price against a theoretical flat-vol fly of the same strikes. I use the PF to give me a dollar figure on index skew.