Hello Becky,

In your daily overview,

- What are the units of d/w/m Expectation values? Is it a %age of the current price or +/- value of price?
- Is there a simple formula for computing d/w/m moves from volatility? or is it a 1SD of the range on each timeframe from the option chains?

Thanks & Regards

Jay

You are reading it correctly… While we have paused the daily overview videos (we will have them back soon), we would suggest to watch an old one to understand the concept better. Here is an example: https://youtu.be/BEqv9omeBVA

Hi Jay… Great thoughts…

Concerning your questions, both #1 and #2 have the same answer really…

In the world of Options trading it is common to use options pricing models which analyze the prices of the options contracts (not the underlying asset). The most common one is the Black-Scholes Model. These pricing models look at things such as the time to the expiration of the contract, the current rates of interest rates, etc. and when comparing all of this and more with the current price of the options contract, one could extrapolate what the expected move is. This is extracted from the implied volatility built-in each options contract.

In the options world and all those different options pricing models it is common to calculate everything for a 1 Standard Deviation and all is annualized… Therefore one could use math to reverse-engineer and conclude what the daily, weekly and monthly moves are expected to be given the current price of such options contract at the moment of the calculation…

There are multiple formulas that help calculate expected moves. A common one is Expected IV (1 SD) = Price (Underlying) x Implied Volatility (Options) / SQRT(252) -> this is for daily moves as there are 252 trading days in a year…

If you want to know more about Options pricing models feel free to Google “Black Sholes Model”. It will not necessarily help you to become a better trader know… But if you are curious, you may have fun with the math 🙂

We hope this helps…

I am aware of the Black Sholes & other Option pricing models. My question was actually about the figures in Traddictiv’s Daily Market Overview. Are you saying that Traddictiv’s daily market overview figures are from the Black & Sholes model?

We use Bjerksund and Stendland… We suggest you attend the OPTIONS WITH OPTIONS sessions we run on the YouTube channel. The next one is in 2 hours from now 😉 http://www.youtube.com/c/tradewithufos

I would like clarification. The expected moves in the newsletter are regarding the movement of volatility on these assets, not the market, but their corresponding volatility symbol that follows, correct? For example, today’s newsletter says: S&P $VIX.X 3803.79 22.38% ±0.54 ±1.18 ±2.46, so am I reading it correctly that this implies that $VIX.X has an expected daily move of +- 0.54, an expected weekly move of +- 1.18, and an expected monthly move of +- 2.46?