« December 2015 »

IVolatility Trading Digest™

Volume 15 Issue 51
Volatility Chart Review

Volatility Chart Review - IVolatility Trading Digest™

Trade selection using volatility as the primary criteria. Different trades for different volatility opportunities.
Please read IVolatility Trading Digest™ Disclaimer at the very bottom of this page

To add comments or to ask questions please click here (or use the blog "COMMENTS" link at the very bottom of the blog page).

Last week Digest Issue 50 "High Yield Liquidity Evaporates" concluded the probability of reaching the previous double bottom upside measuring objective at 2172 declined substantially along with the likelihood of reaching a new high by yearend. Although after December options and futures expiration there could still be an attempt to turn higher, the expected Santa Clause rally in the two remaining holiday shortened weeks, the odds of exceeding the November 3 high of 2116.48 or the more important July 20 high of 2132.82 have greatly diminished. Accordingly, from years of accumulated experience here is a Wall Street adage worth remembering.

"If Santa Claus should fail to call, bears may come to Broad and Wall."

Since trading volume along with earnings announcements and M&A activity should decline this week, this seems like a good time for a volatility chart review for our new readers who may not be familiar with their location and may have been wondering how to find the charts in our complimentary Basic Options service.

From our home page, there are two alternatives. The first and simplest is to enter the symbol in open the space along the top while leaving the next two spaces with their default setting of "ALL" and "Basic Options." For example, enter SPX in the "Symbol:" space. See the image.




The link opens the data table page containing three data tables for SPX the default symbol on December 18, 2105. The first table displays the closing price data for the previous day including the change, 52 week closing high and 52 week closing low with dates, volume, along with the options volume and open interest data.




The second half of the table with volume and open interest does not appear only to fit into this space.

The second table contains Historical Volatility, Implied Volatility and the 30-day correlation to the SPX. In this example, the correlation will be 100% since SPX is the input symbol.




The final table contains option data for at-the-money and three in-the-money strikes for the next two expirations with the strikes listed in the center of the table, but in this space limited truncated image, the put side, normally on the right, does not appear.




TableThen off to right of the option data table there are two chart small images, one for “Price Chart” the second for "Volatility Chart."

Clicking on the Volatility Chart image opens the page with the price, historical and implied volatility tables at the top and a full size volatility chart for the last year along with options volume in a second smaller chart below.




The default values are 1 year showing the Implied Volatility Index Mean “IV Index Mean.” Altering the periods at the top will display 3 month and 6 month charts along with alternatives for Call, Put and both Call & Put providing more details. As an example, highlighting the selection in orange the image above displays the IV Index Mean for the last 6 months with the revealing options volume chart.

For those interested in adding volatility to their strategy repertoire these volatility charts including options volume are the first step in forecasting the all-important implied and historical volatilities for the period of the proposed trade since some judgment is required when selecting the appropriate volatility strategy, volatility charts can help make the right choice. In general, consider strategies with more short options when the implied volatility is above 20 and appears to be declining alternatively consider strategies with more long options when the implied volatility is low and appears to be rising.


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This week and next, a more bullish outlook for January looks rather bleak should the S&P 500 Index fail to find enough support challenge the November 3 high of 2116.48.


Twitter Follow us on twitter for more ideas from our scanners and other developments.


ActionActionable Options™

We now offer daily trading ideas from our RT Options Scanner before the close in the News section of our home page based upon active calls and puts with increasing implied volatility and volume.


Next week the Digest will be dark as they say in show business, for the holidays. The next issue will be January 4, 2016.


Finding Previous Issues and Our Reader Response Request

All previous issues of the Digest can be found by using the small calendar at the top right of the first page of any Digest Issue. Click on any underlined date to see the selected issue. Another source is the Table of Contents link found in the lower right side of the IVolatility Trading Digest section on the home page of our website.

HolidayAs usual, we encourage you to let us know what you think about how we are doing and what you would like to see in future issues. Send us your questions or comments, or if you would like us to look at a specific stock, ETF or futures contract, let us know at Support@IVolatility.com or use the blog response at the bottom of the IVolatility Trading Digest™ page on the IVolatility.com website. To receive the Digest by e-mail let us know at Support@IVolatility.com



IVolatility Trading DigestTM Disclaimer
IVolatility.com is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter constitutes a recommendation to buy or sell any security. Before entering a position check to see how prices compare to those used in the digest, as the prices are likely to change on the next trading day. Our personnel or independent contractors may own positions and/or trade in the securities mentioned. We are not compensated in any way for publishing information about companies in the digest. Make sure to due your fundamental and technical analysis homework along with a realistic evaluation of position size before considering a commitment.

Our purpose is to offer some ideas that will help you make money using IVolatility. We will also use some other tools that are easily available with an Internet connection. Not a lot of complicated math formulas but good trade management. In addition to Volatility we use fundamental and technical analysis tools to increase the probability of success and reduce risk. We prepare a written trade plan defining why the trade is being made, what we call the "DR" (determining rationale) and the Stop/unwind, called the "SU".