where can i get info in historical imlied vol, charts etc. for free! btw...i'm new here...duh...so hello to everyone...i will be asking a lot of questions but would like to think i have something to offer, having made mkts for the past ten years...so dont be shy and ask away
Welcome to ET! http://www.ivolatility.com/home.j And from Larry Mac himself: http://www.optionstrategist.com/free/analysis/data/index.html
I find Optionetic's free futures historical IV stuff hugely valuable: http://platinum.optionetics.com/oafutures.html I know Optionetics offers historical IV on equities with their pay service. Tradestation and IB both offer historical IV for equities as part of their brokerage services. In return for my paltry help, you can describe the methodology you used for market making.
thank you for your response...please dont think i'm avoiding the question...but really there was never that much thought put in to it...it was a very responsive way of trading around perceived fair value...given historical vols for the underlying and the options...buy low...sell high...hedge your delta in the short run...try to spread off the risk with other optiond...leging in to coversions and reversals for edge was always best but calandars and verticals work as well...then manage your risk and put positions on around specific events...fed anouncements, earnings...but the most obvious thing for me was and is, is that options are volatility instruments...for direction i used underlying...outside of that, most guys have thier preferance...some love to be long gama..others love decay...i as most guys would load the gun going in to earnings and dump the vol a day or two before...truly dont care what the stock does...i just realized how long winded i am...sorry
Nonsense! You spent every day doing something that is extremely difficult to find reference material on and very interesting to me. I own "Option Market Making" which sounds useful, but mostly seems vague and "secretive". So, let's say someone bought 100 calls from you. How did you hedge the gamma and delta risk? Did you try to buy puts from someone else to create the conversion? Buy stock? Buy further OTM or ITM calls? Switch calendar months? How long did you wait for another order to offset the risk before you became more aggressive about bidding on hedges? Thanks!
the "mean" historical vols can be very misleading on those free sites...they are strike weighted , volume weighted and exp month weighted. I saw up to 50% diff in what was the actual vols at the time vs the mean value that they plotted a week later. Huge diff for event trader.
mktmkr, try www.iseoptions.com pretty good site to get HV and IV ballpark. you can enter individual tickers and get the results. For IV any good options calculator will give it to you. I use the plain old vanilla one on the cboe site.
if i am a seller of 100 calls (assuming near month at the moneys) it is probabaly because i feel that i am selling them for edge, delta is easy...buy 5k of underlying...now i aquired a short gama postion...thoreticaly speaking if i sold the options at a higher implied vol then the average historical vol of the stock and i continue to hedge agressively...the extra premium from the sale of the options would more then offset my losses from negatively trading the stock...having said that...i look at it interms of my overall position and its limits, gama to theta ratio and my vol position...if i am short more gama then i like, then i would look for an underpriced (current imlied vol relitive to historical iv) option where i would be willing to take a long vol position as it will also provide some long gama, perhaps the next month out...going out three or six months is not much of a hedge for the gama position...if i feel the entire term structure is overpriced(maybe because directional guys are willing to pay up for the calls) then i would look to buy an out of the money put...if stock goes up the calls get crushed and if the stock tanks the vol in the puts should go up...usualy enough to more then cover my losses on the long stock..at that point the calls become a mute point and i let them expire worthless...this is assuming that the sale is an opening trade in a steady vol environment...if i am selling to close then i am just reducing the position and not so worried about gama...i'm taking money off the table and if i am adding to my position while opening, then i feel it is a good sale because 1) the -gama/decay ratio is such that i can make money( i make more on the weekends then i loose trading during the week) or 2) i expect the inplied vol to come in and even if i am loosing on the position overall for now, once the vol comes in...the instant deflation of the options will make up for my short term losses...the bigest problem i see for myself now is learning to trade on a budget...the margin is calculated very diferently when you are a market maker registered as a BD...assume this...long 1000 at the money calls-short 1000 at the money puts-short 100k of a stock trading at $50.00...just the stock margin is 2.5 mil...on the floor its a riskless transaction..yes i know, pin risk, i usually unwind on the day of, so does every one else...yes i pay interest on the money but that is in my model and i should have put the position on for some kind of edge...and paying interest is a whole lot more interesting then coming up with 2.5 mil
Thank you for your insight! I find this incredibly valuable. How do you dynamically hedge this position? Let's say you've sold these 100 calls at a great premium and bought 5k shares and the stock rallies hard. At what delta do you make an adjustment? Do you simply buy more shares or would you start buying gamma as the move went against you? Did you shoot for positive or negative gamma on your overall position? Gamma/theta is an interesting ratio to look at that I had never considered. What sort of limits did you have of this ratio? Thanks again!
hedging can be an art form...some short gama guys trade the stock if they are long gama...gotta have balls and deep pockets for that...i like to use chart...will not buy more stock if if i see resistance on the charts...also, after the move up, look at the position...it inherently gets you long over time...be carefull you might have to sell stock just to stay nuetral...not a bad thing if you are selling after a move up...ratios can be looked at in many ways...the seat of your pants(if you collect 500/day..can you loose LESS then that consistantly?...then add weekends and you're doing great)... or look at average daily vol and st. deviation..if you collect 500/day...what are the chances of the stock moving enough to loose that amount...a lot of guys set arbitrary points...if they are comfortable holding 1000 delta, when the position reaches that number they may hedge 1/2 to 3/4