Trading Volatility and Skew

Discussion in 'Options' started by VolSkewTrader, Dec 15, 2018.

  1. Having trouble predicting and timing the direction of volatility and the shape and slope of the skew intraday as well as long term. If I knew where the underlying (futures contract, stock) was going I could easily tell you where volatility and where the OTM calls will be trading relative to the OTM puts volatility-wise. The hardest part is predicting the direction, size and speed of move of the market. This is what mainly determines the theoretical prices of option outrights and how they trade relative to each other.

    Anyone have a proven system or approach to delta-neutral volatility trading? And how to manage a large inventory of options with different expirations.
  2. ajacobson


    I'm aware of nothing public or a service. Firms that "attempt" to accomplish this generally use VERY EXPENSIVE custom tools and they are developed in-house or in conjunction with a vendor. You are seeking a version of the "holy grail." Even the expensive vendor tools only come close.
    Good luck!
  3. Sure, we all know the direction of underlying assets but just can't figure out how to monetize it. If you could teach us how to make money from options with knowledge of the underlying future direction then we could teach you our fool proof system of knowing the underlying direction and become both incredibly rich.

    vol_trader likes this.
  4. fyi, they teach these things at Trump University
  5. Hmmm...I think you're throwing out some big words here which you do not understand (hence your whole paragraph made very little sence). Maybe you are rushing into this to fast?

    What is the first problem you are having? Can you explain in more detail?
  6. mmm... I don't, but I know who does...
  7. MarkBrown


    i would need to know how much capital and if it's a fit i will put you in touch with a guy who has been doing this for decades.

    if i can't deliver this to you then you can come back here and tell everyone how i jacked you around.
  8. Between $100K and $250K per exchange traded product. My trading strategy is highly scalable, so more liquid and high volume instruments such as the emini-S&P and Treasury options may require between $500k to $1M in margin requirements if the trade proves successful.

    I currently utilize a live curve fitting options pricing algorithm that is commercially available for traders. The algo automatically updates every volatility curve a user trades or watches within a product as fast as every second. In 2019 I plan on recording each curve update/publication as well as the underlying movement that corresponds with it. From this I believe I'll be able to accumulate enough data to produce high probability scenarios for how every volatility curve should behave (shape, skew, kurtosis, etc.) given a move in any direction of the underlying future, stock, or cash instrument. This will be extremely valuable for traders with large option inventories as well as someone who wants to put on a winning delta-neutral options position regardless of the direction of the underlying.

    If you're guy is interested we could exchange emails and go from there.
    MarkBrown likes this.
  9. sle


    So modeling the dynamics of the volatility using some form of stoch vol model? Are you planning to make markets or primarily take concentrated vol position?
  10. See my response to Mark Brown...
    #10     Dec 16, 2018