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Questions tagged [volatility]

For questions related to measurements of the range of returns for a given equity, bond, or market index.

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1 vote
2 answers
930 views

Estimate a future option price given greeks and a 1$ move in underlying

Let us say underlying is at 50$, and the 50 call is at 0.50. delta=0.5, gamma =0.5, theta = .02, vega = .10. I apologize if these numbers are not realistic, I am very poor at Greeks. My question is: ...
0 votes
1 answer
148 views

Is it very safe to short volatility with a small position?

The derivatives of volatility, such as VXX, incur significant long-term holding losses, making shorting appear profitable. However, situations similar to the 2018 'Volmageddon' could easily lead to a ...
-1 votes
1 answer
257 views

How Do You Read This Economic Formula?

I'm trying to understand and interpret this economic formula within research where Implied Volatility is regressed on Realised volatility. But even though I understand the basics of what this article'...
2 votes
3 answers
472 views

why volatility increases price for ITM call options?

Similar questions have been asked here, but I'm not able to find this exact question. For a European call option, if it's very in-the-money, wouldn't a higher volatility decrease the probability it ...
2 votes
4 answers
845 views

Why are profit/loss constantly adjusted in futures contracts if the goal is to protect against volatility?

In this article: http://www.investopedia.com/university/futures/futures2.asp?header_alt=g In the chapter "Profit and Losses-Cash Settlement", the author describes that profit and loss are governed by ...
-1 votes
1 answer
254 views

Is Implied- and Historical Volatility based on solely Business days?

I'm trying to compare historical and implied volatility for different stocks. Still, since I can't tell what these numbers are based on (for historical volatility) and referring to (for Implied), I'm ...
0 votes
1 answer
84 views

confusion about gamma and gamma portfolios

Generally, a long gamma portfolio will make money when the underlying: (a) out-realizes the historical volatility (measured close to close) (b) out-realizes the implied volatility (more than making ...
0 votes
3 answers
275 views

When using the VIX index, is it similar to calculating volatility?

Im trying to understand the VIX Index, it gives the implied volatility of the S&P500. Now if I was to calculate the volatility of the S&P500 using standard deviations of the returns over a ...
6 votes
5 answers
3k views

Why isn't "everyone" short VXX?

I'm going to attempt to keep this question short instead of providing some rambling, and very likely, wrong explanation of the question. As far as I can tell from my novice research the VXX note is ...
0 votes
2 answers
237 views

Duration required for stock beta calculation

I am using stock beta as a parameter for calculating intrinsic value of a stock using DCF method. I know how to calculate beta of stock, but I want to know what should be length of historical data (...
5 votes
2 answers
1k views

Implied or historical volatility to calculate theoretical options price with black scholes?

According to the black scholes model, volatility is one of the variables to calculate the fair price of an option. However, it doesn't specify which volatility should I use. Should I take the ...
2 votes
2 answers
714 views

What's overnight volatility?

https://www.ig.com/uk/view-ig/2016/09/20/the-central-bank-fest-ramps-up-34452 In the FX market, USD/JPY is the pair to watch through Asia today, with the options market showing implied overnight ...
2 votes
0 answers
65 views

Volatility cost of buying Vanguard ETFs before market open on e-trade

I am buying Vanguard ETFs on e-trade. For the purposes of this question, suppose I am buying VO (a multi-sector mid-cap fund). It is a popular symbol (share class total net assets: 51B). I typically ...
6 votes
2 answers
3k views

What is the real return of a portfolio? Markowitz vs "real" return

I am working with mean variance optimization (MVO) and as such after "training" my model I test the results on a test dataset. Markowitz states that the return of a portfolio is the "...
2 votes
2 answers
333 views

How do stock volatility halts work?

I was watching GME stock on Feb 24, 2021, and it halted twice: once at 3:38pm ET, and it resumed trading at 3:43pm ET again at 3:46pm ET, and it did not resume trading until after 4:00pm ET This is ...
0 votes
0 answers
51 views

General formula to understand standard deviation of a stock price over a time horizon?

A book that I'm reading (Paul Wilmott, Derivatives) states the following: The standard deviation of the stock price over this time horizon is $$ \sigma S = \sqrt(1/52) $$ where, the time horizon is ...
0 votes
1 answer
218 views

Calculating volatility percentage for a given time period

I am looking at an EMEA liquidity report. One measure I am interested in is the volatility. The report includes a list of various indexes and the "Average Volatility " for a period of 5 days ...
0 votes
2 answers
236 views

Who is counter party to leveraged ETF e.g TQQQ

I was looking at return of TQQQ, and was surprised with result. I understand that, it is not equity based ETF, and is using derivatives. But I could not understand who is acting as counter party of ...
19 votes
3 answers
4k views

Why would long-term investor care about volatility? [duplicate]

I'm 35 and I want to start investing for my retirement. My question is, why would you care about volatility if your investment horizon is 30+ years? In order to get a more clear picture of volatility ...
2 votes
2 answers
239 views

Why have some stocks spiked then crashed, all within 30 days?

I'm referring to stocks that peaked like a mountain than crashed, but that weren't short squeezes. Is this Irrational Exuberance? If you know more examples, just edit this post please. I know little ...
0 votes
1 answer
110 views

What’s the formula to estimate stock price (in a week or month from now) using implied volatility?

Let’s say a stock trades at $45 today and has IV of 92%. I wanna get a rough range of where the stock might be in a week from now, let’s say $32 to $58 in a week, based on the IV 92%. How do I get ...
1 vote
3 answers
329 views

Trading intraday fluctuation vs. volatility-based option

Recently a question was asked about actively trading stocks based on small fluctuations in price. It seems like if you wanted to do the strategy described here, you might as well buy an option like a ...
1 vote
1 answer
140 views

How is "beta" relevant to long-term ETF investors?

A portion of my investment portfolio is in index-tracking ETFs. On the whole, my ETF portfolio is diversified across many countries and industries. I intend to hold these ETFs for 20-40 years. I ...
0 votes
1 answer
324 views

How to calculate a trailing stop loss for a gamma squeeze?

I'm pretty sure AMC is going to hit crazy prices in a couple of weeks to months. A Korean AI traded fund just dumped Facebook and Wallmart for AMC. Plus, I got in a pretty big fight with some ...
0 votes
1 answer
169 views

Rapids (RPD) cryptocurrency: 3190500% increase in 1 hour

I noticed that the price of Rapids (RPD) cryptocurrency increased by 31,915,000% (market cap: $400bn) in 1 hour yesterday on 8th May. Shortly after (5-10 minutes), the price dropped by 99.6% (market ...
0 votes
2 answers
802 views

What are pros and cons of volatility trading over directional stock trading

Is it true or just my misconception that pro traders trade volatility while retail readers try to predict stock direction (unsuccessfully most of the time). What are the pros and cons of trading ...
1 vote
2 answers
524 views

Why can’t I short Game Stop right now?

I attempted to put in a small short sell order for GME (since I believe the price is currently way overvalued at >$300), but it said the order could not be performed because there are no available ...
0 votes
0 answers
84 views

Best place to keep savings for home down payment?

I'm currently saving for a first home down payment (in USA), but don't want to keep a large pile of money sitting in a low-yield savings account while I'm looking for the right home. I want to find a ...
8 votes
7 answers
36k views

What does it mean to long the convexity of options?

In this Bloomberg video, Curnutt talks about volatility and the convexity of options. Specifically, he says; The spread between the VIX sitting there at 20 for a period of time and this realized vol ...
1 vote
4 answers
968 views

Is it possible to improve stock purchase with limit orders accounting for volatility?

As a retail investor that puts a certain monthly amount into equity, I was wondering which is the best way to proceed when purchasing stocks. By best I mean the one that would allow me to purchase the ...
0 votes
1 answer
138 views

Difference of NAV and market price on stock shares and funds

For the case of companies, my understanding is that the NAV (net asset value) is all its assets minus its liabilities. Then, this value is divided by the total number of shares the company has issued ...
2 votes
3 answers
331 views

Buy and hold VIX futures for guaranteed profit?

This question was inspired by this Motley Fool article: VIX Investing: Why Not Just "Buy Low Fear, Sell High Fear"? Buying low fear and selling high fear seems to be a guaranteed profit ...
9 votes
2 answers
1k views

How is options implied volatility for a stock determined?

For any given stock in Interactive Broker's TWS (and I bet with any other broker), there is an option's historical volatility and an option's implied volatility. I know the historical volatility is ...
6 votes
7 answers
1k views

How to make money from a downward European market?

The trader Alessio Rastani speaks in a BBC interview about the development of the Euro zone and his predictions are quite severe. He predicts a crash within the next 12 months but is also telling ...
0 votes
1 answer
102 views

If the UVXY and SVXY ETFs both track the same VIX futures, why are they so different?

Both UVXY (https://www.etf.com/UVXY) and SVXY (https://www.etf.com/SVXY) track the first- and second-month VIX futures positions. SVXY, however, is an inverse tracker while UVXY is not. What I don't ...
0 votes
1 answer
149 views

Mysterious stock dips [duplicate]

I am relatively new to the stock market and might not know all the useful terminology, so bear with me as I will do my best to explain what I am trying to grasp and hopefully I will be able to learn ...
0 votes
1 answer
78 views

At what % about the stock price should I sell and take my profits? [closed]

at what percentage above the cost price should you walk? prices fluctuate therefore? what should the end point be?
7 votes
9 answers
35k views

Why does a call option's price increase with higher volatility?

As per the Black-Scholes model, the value of a call option is directly proportional to the volatility. Without getting into the derivation of the BS equation, is it possible to intuitively understand ...
1 vote
2 answers
176 views

How can I affect implied volatility of an option?

Implied Volatility represents the actual above-market premium an option contract trades for at any point in time, but it changes in mysterious ways. If I wanted implied volatility to be higher, could ...
-1 votes
3 answers
1k views

How does one lose money when reasonably buying with leverage?

I'm one of the newbie retail investors that this guy (and presumably a lot of his colleagues) seem to hate. Ironically, my biggest loss was from agreeing with specialists that the recent rally is ...
1 vote
1 answer
97 views

Very short-term drop in stock price

When looking at stock price charts, you sometimes see a large drop in the price for just a short amount of time. Is this simply an error in the presentation of the chart, or has the price actually ...
3 votes
1 answer
325 views

Ballpark range for an IV Crush

I would love to enter a few options trades but have learned (the hard way) that moves from high to low IV can mess the returns even when calling the right direction of the move. This is explained in ...
0 votes
1 answer
83 views

Why did the VIX trade for so much around Q4 2011?

It looks like the TVIX in 2011 was trading at some unimaginable prices. $2B USD? Marketwatch has these same numbers. Were these numbers real? How? This seems like an amazing bit of trivia from ...
3 votes
2 answers
222 views

How to continuously plot futures data

Since futures trade on a contract by contract basis, how can you plot the price over an extended period of time? As a reference I have included a plot of VX futures (VIX CBOE volatility index) from ...
0 votes
1 answer
125 views

For a mutual fund - if jensen's alpha keeps increasing with time, then how does beta of the mutual fund get impacted with time?

I am building an excel model to calculate rolling alpha at a monthly level to analyze different equity mutual funds. Along with the rolling alpha, I am also calculating rolling absolute returns and ...
0 votes
1 answer
200 views

What possible reasons are behind the GBP -> EUR rate being the same for a few days?

The GBP -> EUR exchange rate has been stuck at a value of 1.11 since Saturday 7 of September, up from 1.10 since the day before. This seems to me highly irregular, as if all trading activity has ...
1 vote
2 answers
221 views

Options Volatility and Settlement during a merger and acquisition

I'm trying to figure out how the vol of an option on a target change when the deal is a mix of cash stock. We know that in a cash deal, vol creeps to 0 as the deal collects approvals. Stock deal, vol ...
1 vote
3 answers
236 views

What are the most highly leveraged ways for a retail investor to bet against volatility (or inverse volatility)?

I am aware that there is an inverse VIX ETF, but it is not leveraged. The only other way I can think of is to buy VXX puts? Is there another method I am not aware of that provides more leverage?
0 votes
1 answer
457 views

Can ETF be short-squeezed?

Can ETFs be short-squeezed? I'm not familiar with how they work. For ETFs like SPY, it seems it buys and sells stocks in the portfolio. For ETFs like UVXY, it seems it has no real stocks. How does ...
1 vote
1 answer
234 views

How much does the volatility change for a 1$ move in the underlying

Is there a quick and dirty way to approximate how much the volatility of an underlying would change for a 1$ move in the underlying. The individual option Greeks measure the sensitivity of an option ...