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Volatility Analysis made easier - Implied Volatility Surface by Delta launched

We’re proud to announce a major enhancement to our IVolatility.com Historical Database – Implied Volatility Surface by Delta has been added to enhance a wide selection of available market indicators.

The cutting-edge IVolatility database is a product of combining high-end technology and years of quantitative market research. A unique data storage scheme gives you the ability to back-test your trading ideas against past market data. Our most valuable asset, implied volatility data, can be accessed in a multitude of ways – from standard option chain implied volatilities and ‘Greeks’ to 3-dimensional volatility surface presented as data array. Now the implied volatility surface data is available in two formats – our current surface by ‘Moneyness’ and our new surface by Delta. Another valuable addition is a parameterized representation of Implied Volatility curve (parameterized volatility skew).

Volatility Surface by ‘Moneyness’

The surface by ‘moneyness’ is a convenient strike and time skew presentation. For every equity we provide implied volatility for a fixed set of time horizons (from 1 month to 2 years) and standard ‘Moneyness’ points (11 points total – one at-the-money point and 5 points above and below the spot price, with 10% of the underlying price steps).


SPX, 07/19/2006, Volatility Surface by Moneyness

Such data representation allows for an effective and accurate past data analysis - to determine if certain option is historically cheap or expensive, one needs to compare it with an option in history having the same or similar parameters. However, the same expiry and strike might not be available in history; the surface however provides data for a standard set of periods and ‘moneyness’ points for each day in the history. The same point is valid for pairs trading and other cross-stock strategies.

Volatility Surface by Delta

The surface by delta is very similar to surface by ‘moneyness’ but this time Implied volatility is provided as a function of Delta, which is the "most natural" way (’moneyness’ and virtual strike are given for each point as well). Roughly, delta is a better indicator (compared to ‘moneyness’) of how far out of / in the money the option is. A contract 10% OTM is almost at the money for LEAPs, but a very far OTM for a contract expiring in a week. Finally, Delta surface is a "natural" from a hedging point of view - you need actual deltas to hedge, not moneyness.


IV vs Delta and IV vs Strike (based on parameterized volatility skew); SPX 07/19/2006

We offer two Surfaces by Delta – one is based on ‘raw’ implied volatility data and a smoothed one, based on parameterized representation of ‘raw’ volatility data. The chart above is for the latter Surface. Parameterized volatility curve has 2 major advantages compared to raw implied data:

  • data compression: just 3 parameters describe each actual expiration instead of point-to-point data
  • data regularization: parameterized curve smoothes the original data, which can be too ragged to allow for fine data analysis

Here is an example of parameterized volatility curve for SPX as of 7/19/2006 (, where x - log moneyness, y - implied variance):

The difference - summary

Briefly summing up the differences between Delta surface and the other most similar dataset - IV Surface by moneyness:

  • Delta surface and Raw Delta surface are built for a standard set of deltas, not ‘moneyness’ points
  • Delta surface (but not Raw Delta surface) is smooth with regard to virtual expiry, strike and historical time by construction
  • half of the optionable stocks have "limited" Delta surface – so only an ATM point for each virtual expiry can be provided; Raw Delta surface is given for almost all stocks.

The above makes Delta surface a far more reliable source of data; however no strike skew can be calculated for about 50% of names here. But, on the other hand, there is not much meaning in calculating skew for the rest. These are names the have poor option chains and illiquid contracts to begin with. For them it is typical that implied volatility for even slightly OTM options is not reliable and spiky (changes abruptly from day to day). However, if you are more interested in coverage than in data quality, you can use Raw Delta surface data for these names. Here is a typical example of raw Delta surface when delta surface based on parameterized volatility skew only gives one point with delta=0.5:


IV vs Delta and IV vs Strike (based on parameterized volatility skew); COHR 09/01/2006

For in-depth description of the new datasets and details on how we calculate it please refer to the Volatility Surface by Delta Guide.

To order the data email us at sales@ivolatility.com or call us at +1-917-607-1200 and +1-866-400-EGAR (3427)

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