Effective Analytics Are Best . . . Asymmetrical Questions
Northington Dahl berg Research
VBSR
QUANTITATIVE | RESEARCH | ANALYTICS | PORTFOLIO MANAGEMENT INNOVATION INTO RETURNS
Volatility-Based Support Resistance
QUESTIONS WHAT WILL BE THE UNDERLYING PRICE DIRECTION DURING MY HOLDING PERIOD? WILL IMPLIED VOLATILITY INCREASE OR DECREASE DURING MY HOLDING PERIOD?
Should a particular opportunity be traded? Is this a high probability reversal trade? Is this a good point to enter the trend? Is the option going to increase in value going forward, even if the underlying price does not change? What strike price level gives the best value for hedging this trade? Is there a valid volatility arbitrage opportunity with this security, or securities? At what price should the trade be exited? What is my reward to risk ratio? Is now when the trade should be exited? What is my risk in terms of underlying price? Will simple a call or put trade be more profitable than a spread trade? Is the overall demand for a security higher, or lower, than it has recently been?
Asymmetrical Questions
Effective Analytics Are Best . . . When linear measurement and alignment is avoided. When accurate volatility measurement is integral. When actual exchange traded microstructure is a basis; in lieu disassociated timing, cycles and wave theories.
CONTACT US TODAY TO DISCUSS YOUR GOALS AND WORKFLOW
VBSR Volatility-Based Support Resistance
THE DISTRIBUTION OF 20-DAY SLOPE VALUES; BEFORE AND AFTER VBSR SUPPORT. ONCE VBSR SUPPORT OCCURS WITH RISING IMPLIED VOLATILITY . . . THERE IS A 68% PROBABILITY THAT IVOL DIRECTION WILL BECOME NET NEGATIVE.
QUANTITATIVE
Before
After
SAMPLE = POPULATION: 803 INSTANCES TOP 5 SECTOR SPIDER HOLDINGS FOR 9 SECTOR SELECT ETFs [45 STOCKS] 2004 TO 2013 BEFORE VBSR SUPPORT: IVOL SLOPE > .1 PER DAY IVOL MEAN SLOPE = .36 IVOL MEDIAN SLOPE = .27 AFTER VBSR SUPPORT: IVOL MEAN SLOPE = -.07 IVOL MEDIAN SLOPE = -.13 CHANGE = -.42 PROBABILITY OF NEGATIVE SLOPE = 68%
WITH THE PROBABILITY OF PRICE TO STOP FALLING, AND IMPLIED VOLATILITY TO STOP RISING THEN . . .
Asymmetrical Probabilities
LONG CALL _ _ A DEEPER IN-THE-MONEY CALL WITH MORE INTRINSIC VALUE CAN REDUCE TIME DECAY DUE TO IMPLIED VOLATILITY COLLAPSING WHILE STILL HAVING AN ASYMMETRIC PRICE TRADE. SPREADING _ _ A NEUTRAL/LONG BIAS ON THE UNDERLYING PRICE, THEN A BULLISH PUT SPREAD WOULD BE POSITIONED TO CAPITALIZE ON THE INCREASED PROBABILITY OF IMPLIED VOLATILITY REVERSING DIRECTION FROM HIGHER TO LOWER. COVERED CALL WRITING/OVERWRITING _ _ WITH CURRENT PREMIUMS HIGH DUE TO RISING IMPLIED VOLATILITY IT MAY BE POSSIBLE TO WRITE A FURTHER OUT-OF-THE-MONEY CALL TO GENERATE INCOME, WITH LOW PROBABILITY OF BEING CALLED AWAY.
CONTACT US TO DISCUSS ADVANCED ANALYTICS FOR YOUR FIRM
NORTHINGTON DAHLBERG RESEARCH
704.542.0156 INFO@RELATIVESTRENGT HRESEARCH.COM CHARLOTTE, NC USA
VBSR
QUANTITATIVE | RESEARCH | ANALYTICS | PORTFOLIO MANAGEMENT INNOVATION INTO RETURNS
Volatility-Based Support Resistance
QUESTIONS WHAT WILL BE THE UNDERLYING PRICE DIRECTION DURING MY HOLDING PERIOD? WILL IMPLIED VOLATILITY INCREASE OR DECREASE DURING MY HOLDING PERIOD?
Should a particular opportunity be traded? Is this a high probability reversal trade? Is this a good point to enter the trend? Is the option going to increase in value going forward, even if the underlying price does not change? What strike price level gives the best value for hedging this trade? Is there a valid volatility arbitrage opportunity with this security, or securities? At what price should the trade be exited? What is my reward to risk ratio? Is now when the trade should be exited? What is my risk in terms of underlying price? Will simple a call or put trade be more profitable than a spread trade? Is the overall demand for a security higher, or lower, than it has recently been?
Asymmetrical Questions
Effective Analytics Are Best . . . When linear measurement and alignment is avoided. When accurate volatility measurement is integral. When actual exchange traded microstructure is a basis; in lieu disassociated timing, cycles and wave theories.
CONTACT US TODAY TO DISCUSS YOUR GOALS AND WORKFLOW
VBSR Volatility-Based Support Resistance
THE DISTRIBUTION OF 20-DAY SLOPE VALUES; BEFORE AND AFTER VBSR SUPPORT. ONCE VBSR SUPPORT OCCURS WITH RISING IMPLIED VOLATILITY . . . THERE IS A 68% PROBABILITY THAT IVOL DIRECTION WILL BECOME NET NEGATIVE.
QUANTITATIVE
Before
After
SAMPLE = POPULATION: 803 INSTANCES TOP 5 SECTOR SPIDER HOLDINGS FOR 9 SECTOR SELECT ETFs [45 STOCKS] 2004 TO 2013 BEFORE VBSR SUPPORT: IVOL SLOPE > .1 PER DAY IVOL MEAN SLOPE = .36 IVOL MEDIAN SLOPE = .27 AFTER VBSR SUPPORT: IVOL MEAN SLOPE = -.07 IVOL MEDIAN SLOPE = -.13 CHANGE = -.42 PROBABILITY OF NEGATIVE SLOPE = 68%
WITH THE PROBABILITY OF PRICE TO STOP FALLING, AND IMPLIED VOLATILITY TO STOP RISING THEN . . .
Asymmetrical Probabilities
LONG CALL _ _ A DEEPER IN-THE-MONEY CALL WITH MORE INTRINSIC VALUE CAN REDUCE TIME DECAY DUE TO IMPLIED VOLATILITY COLLAPSING WHILE STILL HAVING AN ASYMMETRIC PRICE TRADE. SPREADING _ _ A NEUTRAL/LONG BIAS ON THE UNDERLYING PRICE, THEN A BULLISH PUT SPREAD WOULD BE POSITIONED TO CAPITALIZE ON THE INCREASED PROBABILITY OF IMPLIED VOLATILITY REVERSING DIRECTION FROM HIGHER TO LOWER. COVERED CALL WRITING/OVERWRITING _ _ WITH CURRENT PREMIUMS HIGH DUE TO RISING IMPLIED VOLATILITY IT MAY BE POSSIBLE TO WRITE A FURTHER OUT-OF-THE-MONEY CALL TO GENERATE INCOME, WITH LOW PROBABILITY OF BEING CALLED AWAY.
CONTACT US TO DISCUSS ADVANCED ANALYTICS FOR YOUR FIRM
NORTHINGTON DAHLBERG RESEARCH
704.542.0156 INFO@RELATIVESTRENGT HRESEARCH.COM CHARLOTTE, NC USA
