Implied Volatility Surface uncovered - Advanced Options service upgrade

Dear Subscriber,

We are pleased to announce that an enhanced version of our popular Advanced Options page has been released. A number of volatility charting features has been added which should help you in finding the right options to trade - you can now see a 3-D chart of implied volatility surface.

Please note that all new features are available for end-of-day service mode only, 'live' (20-minute delayed) service mode will be upgraded later.

The new features are taking advantages of the recent addition of the implied volatity data representation - the Parameterized Volatility Skew and Implied Volatility Surface by Delta. The new dataset offers - convenient strike and time skew presentation; multi-variable presentation: you can look at IV as a function of delta or moneyness or strike, whatever is appropriate for your purpose;data smoothness: Delta surface is built on the basis of Parameterized IV Skew, which makes it smooth across expiration horizon, delta and historical time - an important factor for precise IV data analysis. The Implied Volatility Surface methodology guide is available for download.

For those of you who are not yet familiar with this tool we advise to read the detailed service description available online. Here we will briefly describe the new features.

First, the new 'charts' section has been added.

The charts can be displayed either as 'Raw' data based or 'Parameterized' data based. Selection is made with the scroll down menu below the chart icons.

Volatility Surface (3-D Chart) - To show Volatility Surface by Delta we use OTM options, therefore their Delta is ranging between -0.5 and 0.5 (Puts having negative Delta, Calls – positive). In calculation of our Surface we use for Calls their ‘real Delta’, whereas for Puts delta is 1-ABS(Real Delta). Thus, our 'Delta' has a range from ‘0’ to ‘1’. We are selecting then the fixed points between 0.1 and 0.9 with 0.05 step and building our Surface. As a result, the IV of Delta <0.5 is equal to the IV of OTM Call option. Whereas IV of Delta >0.5 is equal to the IV of OTM Put option. Parameterized IV is shown as a function of period and one of the following parameters: Delta, Moneyness or Strike. Chart has standard features: rotation, zoom, color (just click on the image). Read more about difference representations of Volatility Surface and the way it was calculated in the Surface Methodology guide

ATM IV At-the-money options contracts volatility versus maturity (implied volatility time skew)

Calls/Puts Skew Chart - Skew ('Risk Reversal') shows a spread between IV of OTM Put option and IV of OTM Call option for two fixed Delta points: 0.1 and 0.25 for Calls and -0.9 and -0.75 for Puts (on the Volatility Surface chart these are 0.1 and 0.25 'Delta' points):

    C/P Skew (0.1) = IV(Put with delta=-0.9) - IV(Call with delta=0.1)
    C/P Skew (0.25) = IV(Put with delta=-0.75) - IV(Call with delta=0.25)

'Butterfly' Chart – 'Butterfly' presents a spread between IV of OTM options and IV of ATM options. It is calculated as an excess of Put and Call IV for OTM contracts over doubled ATM IV, specifically:
    'Butterfly'(0.1) = IV(Put with delta=-0.9) + IV(Call with delta=0.1) - 2 * ATM IV
    'Butterfly'(0.25) = IV(Put with delta=-0.75) + IV(Call with delta=0.25) - 2 * ATM IV

You can click on the chart image to enlarge it.

Other two charts available in Advanced Options are Volatility Skew and Time Skew:

Volatility Skew Chart – Helps us to get a sense of how the volatility of each strike looks like in comparison to other strikes in the same month – to see if there is any bias to OTM call or puts, and if so, to determine what type of strategy we would rather use to take advantage of this situation. Non-interpolated IV values are shown on the chart as points and Parameterized Volatility as a line.

Time Skew Chart – Gives us a sense of how volatility is trading in different months for the stocks you are tracking so that you can quickly identify and try to take advantage of any disparity. Non-interpolated IV values are shown on the chart as points and Parameterized Volatility as a line.

Finally, the volatility skew chart parameterization coefficients are displayed at the top of every 'expiry' in the option chain section, along with the underlying forward price for the given expiry date:

As usually, feel free to email us your questions and suggestions at

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