Crash in IV

TradeOptions

Well-Known Member
#1
As expected by many, the IV Crashed on 18 Sep 2015 for most of the counters, thereby decreasing the values of the Calls as well as Puts.

During such events, the temptation for taking a directional bet by either buying a naked Call or Put, is quite high among the retail traders. I myself suffer from this temptation !

But most often, such retail traders end up in loss because of the IV Crash that happens after the high volatility event. The exception is that scenario in which market makes a very big move in our favorable direction, which will overcome the effect of IV crash and still give us some good profits. But such occurrences are quite rare.

Thanks and regards

 
#2
Parhaps, short straddle could be a better strategy with delta hedge... but short vol ... this way you can cash in to the vol crash without much worrying on the movement on the underlying.

on the hindsight... I see the vols building again after the crash... as Fed by not increasing the rates, has kept its changes of hiking in oct/dec thereby again building up on the uncertainty.

so good time to take long vol positions....do keep in mind the expiry is coming this 24th!
 
#3
@TradeOptions :
The data is derived or taken from NSE? NSE Daily Volatility file does not match with ur data.
Or,
Have you calculated IV from options chains as VIX is calculated? I did not find any such file in NSE site with individual stocks with their IVs calculated from Options.

Kindly explain.
 

TradeOptions

Well-Known Member
#4
@TradeOptions :
The data is derived or taken from NSE? NSE Daily Volatility file does not match with ur data.
Or,
Have you calculated IV from options chains as VIX is calculated? I did not find any such file in NSE site with individual stocks with their IVs calculated from Options.

Kindly explain.
poniol, the data is from myfno. They calculate the IV data on their own, so there might be differences for sure.
Which particular NSE file are you talking about ? Can you please share the link for that file ?

Thanks
 

TradeOptions

Well-Known Member
#5
Parhaps, short straddle could be a better strategy with delta hedge... but short vol ... this way you can cash in to the vol crash without much worrying on the movement on the underlying.

on the hindsight... I see the vols building again after the crash... as Fed by not increasing the rates, has kept its changes of hiking in oct/dec thereby again building up on the uncertainty.

so good time to take long vol positions....do keep in mind the expiry is coming this 24th!
Thanks for sharing your views samip2u.
Nice name by the way, I guess it means - "near to you". :)

Can anyone please share some input in this regards - Which particular option strategies are recommended, if someone has to just take a trade based on IV Crash Scenario, without being clear about the direction of the underlying ? And for the opposite scenario as well, when someone is expecting the IV to shoot up in the near term, without any clear idea about the direction of the underlying ?


Thanks and regards
 
#6
#7
The file is not based on Options. It shows only price Volatility. Available under daily reports segment.
Here a sample of 18th.
www(dot)nseindia.com/archives/nsccl/volt/FOVOLT_21092015.csv
 

TradeOptions

Well-Known Member
#8
The file is not based on Options. It shows only price Volatility. Available under daily reports segment.
Here a sample of 18th.
www(dot)nseindia.com/archives/nsccl/volt/FOVOLT_21092015.csv
Thank you brother for sharing the link. Yes you are correct, it is not based on Options, whereas myfno IV Values are based on that.


Thanks and regards
 

amitrandive

Well-Known Member
#9
Thanks for sharing your views samip2u.
Nice name by the way, I guess it means - "near to you". :)

Can anyone please share some input in this regards - Which particular option strategies are recommended, if someone has to just take a trade based on IV Crash Scenario, without being clear about the direction of the underlying ? And for the opposite scenario as well, when someone is expecting the IV to shoot up in the near term, without any clear idea about the direction of the underlying ?


Thanks and regards
How to understand that the IV's are inflated or at normal levels?
If we understand the answer to this , only then we can devise strategies.:D
 

TradeOptions

Well-Known Member
#10
How to understand that the IV's are inflated or at normal levels?
If we understand the answer to this , only then we can devise strategies.:D
brother, I am not sure, but one way of doing that might be to check the IV Percentile Values over past time periods of different durations. If the IV is among the Top Percentile, then that might be inflated and vice verse. Although I am myself not completely sure about this approach, maybe if other members post their views about the same, then we can understand it better.

And secondly, I also want to know, if it is possible for some big market operators to somehow Fake or Manipulate the IV Value for any particular counter, according to his own trading game plan, such that his open positions benefit from that kind of change in IV.

I will try to explain it with an example. Suppose some real big player has created positions worth Rs 100 crore in the Options Segment of Infy. Now, suppose that his option position would benefit greatly if there is a big jump in Infy IV over next 2-3 days. So, my question is that, is it possible for this guy to somehow Manipulate the IV of Infy in order to increase it ? Can he play some trick in the various option strikes of Infy, in such a manner, which would create a spike in the IV ? Is it possible at all or not ? Please share your views about such a hypothetical scenario.

We can look at it from the opposite side as well. If some big operator wants to crash the IV of Infy for his benefit, then can he do that in some way ? Is it possible ? If yes, then how ?


Thanks a lot
 

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