RWM ok to hold longer than a day?

So, what do you see as the expected move in 21 days?
Can anybody know that?
Ah, I guess you mean the "ExpectedMove(.)" formula. Forget it! It has this funny name, but means in fact something different!

You have to be precise: expected outcome in 21 days for which Sx and IV? (Sx means "current stock price", ie. that in 21 days).
FYI: IV at expiration does not play any role anymore, but not so with the stock price, as now everything depends on just on the stock price alone.

You say you know what the PnL chart is and how to read it, but it really does not seem so...

 

FairPut = DirtFloors

 

Stop spamming the thread with your such off-topic nonsense!

 

@wxytrader, it seems you are misinterpreting the so called "ExpectedMove" formula
See also https://optionshawk.com/calculating-expected-moves-using-options/

To clarify:
It calculates a from...to range where the stock price should be after that time,
ie. the stock price should be somewhere between the calculated two boundaries for -1SD and +1SD.

For example when volatility is 30 for a stock with price 100, then after a year the stock price should be between 100-30 and 100+30, ie. between 70 and 130.
(This is the simple NormalDistribution variant. A more correct variant is the LognormalDistribution variant.)

And remember to use the ATM IV for all and any strike of an option when using this function, not the IV of that strike itself.
I hope you are not too much confused

 

Code:

Using NormalDistribution:
ExpectedMove for S=100.0000 Vola=30.00 nDays=365.00 rPct=0.00 qPct=0.00 z=-1.0000 : -30.0000(-30.00% --> Sx=70.0000 )
ExpectedMove for S=100.0000 Vola=30.00 nDays=365.00 rPct=0.00 qPct=0.00 z=+1.0000 : +30.0000(+30.00% --> Sx=130.0000)

Using LognormalDistribution:
ExpectedMove for S=100.0000 Vola=30.00 nDays=365.00 rPct=0.00 qPct=0.00 z=-1.0000 : -25.9182(-30.00% --> Sx=74.0818 )
ExpectedMove for S=100.0000 Vola=30.00 nDays=365.00 rPct=0.00 qPct=0.00 z=+1.0000 : +34.9859(+30.00% --> Sx=134.9859)

 

How do you then get 12 and 20? 16.50 - 9 gives 7.50, and 16.50 + 9 gives 25.50
Here's more exact values:

Code:

Using NormalDistribution:
ExpectedMove for S=16.5000 Vola=242.00 nDays=21.00 rPct=0.00 qPct=0.00 z=-1.0000 : -9.5777(-58.05% --> Sx=6.9223  )
ExpectedMove for S=16.5000 Vola=242.00 nDays=21.00 rPct=0.00 qPct=0.00 z=+1.0000 : +9.5777(+58.05% --> Sx=26.0777 )

Using LognormalDistribution:
ExpectedMove for S=16.5000 Vola=242.00 nDays=21.00 rPct=0.00 qPct=0.00 z=-1.0000 : -7.2660(-58.05% --> Sx=9.2340  )
ExpectedMove for S=16.5000 Vola=242.00 nDays=21.00 rPct=0.00 qPct=0.00 z=+1.0000 : +12.9834(+58.05% --> Sx=29.4834 )

See "Step 2": it's intended to "close the gap" by buying cheap LPs after some time-decay.
Do your test also after adding or activating the K=14 leg in the example (see there).

Here's the result after activating LP.K=14:

That's ok as long as you get a good/better/improved PnL chart.
But shortselling requires some collateral (margin req or cash req). Don't forget in your tests...

Hmm. daily? Ignoring B/Es ? Just explain pls.

 

you are the only post I see in this thread.

 

Shorting 230 vol; buying 73 vol. Why not? Time decay! Or we’ll arrive at a figure which results in no loss on the stress. Easy!










dirtfloors

 

I had glanced at tos (beer) and read it as a total range not as 1 SD
For 1SD (21 dte) price targets I get $6.88 down and $25.90 up with 242% IV.

For your logorithmic method you are using the atm IV for contracts expiring today, or take the IV for the contracts 21 days out?

The parameters:

• Pick any stock you want. I ran TSLA, NVDA, SAVE.
• Sell daily -1 ATM puts. When assigned sell +1 ATM calls.
• Calculate the realized losses when shares called away below assigned strike.

I ran the entire year based on starting the wheel Jan3 2023 to Dec29 2023
I am using the current -1 atm +1 atm option premium for the calculations. If you have access to actual option prices for 2023 then use those #'s.
With this method, you will be realizing losses, but will be offsetting those losses with premium.

Then run it again, but this time sell the calls at +1 the assigned strike, or the assigned strike to break even...up to you. With this method you won't realize any losses, but will be collecting less premium.

Or just do the month of DEC 2023 manually.

I did this on a spreadsheet, you can code it or do however.

 

ATM IV is normally calculated using today's Bid/Ask prices for days till expiration (DTE), ie. your 2nd case.
The easiest/simplest method uses precalculated IVs (if available):

Code:

ATM_IV = ( IV_of_nearest_Call_strike_to_stockprice  +  IV_of_nearest_Put_strike_to_stockprice ) / 2

Other more accurate methods exist, but require much more computing work.