local volatility model

Wheezooo · Nov 5, 2019

Matt_ORATS said:
Hi TheBigShort
Thanks for being a subscriber.
I'll expand on the how we calculate the earnings effect defined as the amount of extra implied volatility in each expiration due to the expected move after an earnings announcement.

To remove the implied earnings effect in the IV, ORATS follows these steps.

Apply accurate earnings announcement dates to determine how many earnings apply to each expiration;

Solve for an earnings move that makes the most rational resultant ex-earnings effect monthly implied volatility relationships;

Present monthly and constant maturity readings historically.

For example, consider LULU that announced earnings 8/30/2018 after the close. Presented below is the method for extracting earnings from IV. See the at-the-money IVs for each expiration, post removal of earnings effect IV, and that portion of the IV that is applicable to the earnings announcement move:

The 8/25/2018 expiry does not have an earnings effect. 8/31/2018 has the largest earnings effect (since the earnings effect will have a greater percentage of days relative to the number of days to expiration). Notice how the method solves for a remaining NEW IV skew that is still down sloping (backwardation).

I hope this helps.
Matt
More...

You don't use decimals???

...and a suggestion. Excel --> format data series --> line style --> smooth

deltastrike · Nov 6, 2019

Resto said:
I already heard about this, for example, a freak like you, on the Russian site of traders Smart Lab asked me to show how I can work without stop loss for a day with a leverage of 1k100, for two days in a row I showed it shut up

at the same time there were 12 trading instruments in work!

And currencies and the commodity market and stocks and indices

I am sure I have earned more than you in a year in these two days!
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Are those values in rubles?

Resto · Nov 6, 2019

deltastrike said:
Are those values in rubles?
More...

No in dollars

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local volatility model

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