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Options Trading Beginner
http://www.optionstradingbeginner.blogspot.com/
Let's learn stock options trading from scratch toward making money consistently in the market. Here I am sharing my learning, from option basic, how to get started, trading psychology, risk & money management, trading system/strategy, & experience/mistake from my trading.
67 articles
Behaviour of GAMMA in relation to TIME REMAINING TO EXPIRATION ? With Past DATA and CHARTS
From Options Trading Beginner, 7 month ago, Read 0 times. Similar articles
As discussed previously in the earlier post, here is the behavior of Gamma in relation toTime to Expiration:Assume all other factors unchanged:For ATM options, Gamma increases (is higher) as time to expiration is nearing.In contrast, for both deep ITM and deep OTM options, Gamma normally decreases (is lower) as time to expiration is nearing.We will use the same past actual data as shown in the previous post on the behavior of Delta, namely:Options Chain for Call options of RIMM as at 3 Sep...
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Behaviour of DELTA in relation to TIME REMAINING TO EXPIRATION ? With Past DATA and CHARTS
From Options Trading Beginner, 8 month ago, Read 0 times. Similar articles
The following is the behavior of Delta in relation to Time to Expiration:Assume all other factors unchanged:As the time to expiration is nearing, the Delta of ITM options increases (i.e. ITM option's Delta gets closer to 1 for Calls or to -1 for Puts) and the Delta of OTM options decreases (i.e. OTM option's Delta gets closer to 0).Now, let's observe using the past real data.The following is the Options Chain for Call options of RIMM as at 3 Sep 2010, when the closing price is $44.78 and...
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Behaviour of OPTION GREEKS in relation to TIME REMAINING TO EXPIRATION and IMPLIED VOLATILITY (IV) ? With Past DATA and CHARTS
From Options Trading Beginner, 8 month ago, Read 0 times. Similar articles
The past articles in this blog have discussed many times about the effect of time remaining to expiration and IV on Options Greeks.In fact, not only this blog, many other websites have done the same too.Nevertheless, generally these topics are only discussed qualitatively, as it is quite tedious and time consuming to show these using real data.While there is an adage ?A picture speaks a thousand words', I am trying to show how Options Greeks behave in relation to the changes in time remaining...
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Historical Volatility ? Part 7: Comparing HV
From Options Trading Beginner, 8 month ago, Read 0 times. Similar articles
Go back to Part 6: Interpretation.One other way to use the HV data is by comparing the values among different stocks, as well as for a particular stock.Here are some of the possible ways and its purpose/use:1) Comparing the HVs among different stocks.Although the volatility always fluctuates, it tends to oscillate around some ?normal' value over long period of time, which can be deemed as its ?average' value. When the volatility is relatively high or low, it would then move back or reverse...
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Historical Volatility ? Part 6: Interpretation
From Options Trading Beginner, 9 month ago, Read 0 times. Similar articles
Go back to Part 5: How To Annualise Standard Deviation.
After we know the definition and how to calculate HV, we'll move on to its interpretation.
Example:
If it is known that the value of HV is 35%. Remember that this HV value is annualised, i.e. for one year.
As mentioned in the earlier post, assuming that price returns are normally distributed, about two-third of the time, an individual return would fall within one standard deviation of the mean, and about 95% of the time, an individual...
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Historical Volatility ? Part 5: How To Annualise Standard Deviation
From Options Trading Beginner, 12 month ago, Read 0 times. Similar articles
Go back to Part 4: Understanding Standard DeviationAs mentioned earlier, Historical Volatility is actually a standard deviation. The standard deviation can be calculated using historical price data in terms of daily, weekly, monthly, quarterly or yearly.Historical Volatility is then expressed in terms of annualised standard deviation of % price returns, so that it can be compared across different stocks, regardless of the stock price and period used for HV calculation.The formula to annualise...
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Historical Volatility ? Part 4: Understanding Standard Deviation
From Options Trading Beginner, 1 year ago, Read 0 times. Similar articles
Go back to Part 3: Steps to Calculate HV using MS Excel (with Example) As Historical Volatility (HV) is calculated using standard deviation, it might be good to understand better about the concept of standard deviation, so that we can interpret the meaning of HV better.Standard deviation is a measure of data variability or dispersion (i.e. how spread out the data points from its mean). When the standard deviation is low, that means the data points tend to be very close to its mean (i.e. the...
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Historical Volatility ? Part 3: Steps to Calculate HV using MS Excel (with Example)
From Options Trading Beginner, 1 year ago, Read 0 times. Similar articles
Go back to Part 2: Formula to Calculate HVExample for HV Calculation:Suppose we have the daily stock price data and would want to calculate HV for 10-day period (10-day HV).The daily stock price data is in the first two column of the table below:Note:Step 1, 2 and 3 in the table will be described below.Steps to calculate Historical Volatility (using MS Excel):Step 1: Calculate the Price Returns.In this case for the above example, we use formula (4) mentioned in the earlier part (Part...
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Historical Volatility ? Part 2: Formula to Calculate HV
From Options Trading Beginner, 1 year ago, Read 0 times. Similar articles
Go back to Part 1: Definition of Historical VolatilityAs mentioned in Part 1, to obtain Historical Volatility, we need to calculate the standard deviation of the price returns using historical data (which can be in terms of daily, weekly, monthly, quarterly or yearly) over a certain period.Commonly, the daily price data for the period of 10 days, 20 days, or 30 days are used.Theoretically, the formula to calculate Historical Volatility (i.e. standard deviation of % stock's returns) is as...
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Historical Volatility ? Part 1: Definition
From Options Trading Beginner, 1 year ago, Read 0 times. Similar articles
Historical Volatility (HV) is a measure of the fluctuations of the stock price (i.e. how volatile the prices had fluctuated) over a certain period of time in the past.Suppose the daily closing prices of Stock X and Y for the past 10 days are shown as follows:As can be seen from the data above, regardless of the direction (up or down), the closing prices of Stock X in the past 10 days have fluctuated / changed by $2 to $5, whereas Stock Y by $1 to $3.Since given the same initial stock price of...
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