I have emailed TOS on this and they seem to say no, but hard to believe. Their Spread Hacker looks amazing, but it is just spreads. But I just want to see what the model price of single options are and see then ranked from most overpriced, or from most under-priced. The idea is to hedge short overpriced options with long under-priced in a different stock to take market risk out. One way would be to rank by differential of HV to IV (ivolitity.com does that) If TOS does not do it, are there any free rankers?
How do you know that the options are over (or under) priced? What if the UL is now in a higher (or lower) period of volatility and that's the new norm? Using different stocks introduces market risk, not removes it. If you hedge the options of one stock with those of another, you better be sure that the UL's correlate precisely (very unlikely) otherwise you may find them moving in opposite directions. When that happens, even if you somehow manage to collect some pennies from getting some of the respective IV expanionsion/contraction that you're chasing, you're going to lose dollars on both legs.
I am sure you are getting this "top trade secret" from some seminar (free or paid) to sell overprice and long underprice options, but the thing that those seminar never tell you is that - NO ONE can tell if the options if over or underprice ! Forget about looking at history IV - This approach is not working. This is aka you look at the history price of a stock and convince yourself you are buying cheap or selling expensive.
Hi spindr0, Yes you can lose money doing it, but so far its worked quite well for me. But I am doing it manually and as such not finding the best ones. The first batch of 15 or so was successful, but they are over now and need to find next batch and want to save time doing it and findingthe best, especially if start doing 25 hedges at a time. I do throw in every other factor can to sell one think will go down and buy one that think will go up. But it would most helpful to see a ranking of options that are overpriced via an option model and the reverse. UV? Must plead ignorance even looked that up in options glossary and could not find it. I know IV and HV, what is UV? Thanks to other poster on link, will check out. So it sounds like TOS does not tell you what the model value of an option is.
Hi Galvin, No seminar. Read a book many years ago on this, and decided to try it out this year. Do throw in adjusting positions, doing a short vertical spread against long non-spread, look at chart etc. But would like the best candidates a lot easier then am doing it now. How do you locate overpriced options? Cheers
If you're having success with this is more than likely because you're getting the direction right rather than the IV. You can verify/disprove this by plopping the opening and closing option quotes (and other details) into a pricing model. It's UL as in underlying not UV.
Ah under lying, Thanks. It has worked so well so far do think luck is involved. How I see it is 2 out of 3. If both stocks sit still or move similar it makes $, If long does better, makes $, if short does better loses $. Cheers
I assume the thread starter is looking for O/U analytics based upon the ATM volatility, expressed in vol or premium. This is a common feature of front-ends like microhedge.