Category: Options

  • IV Rank and Strategy Selection

    As we primarily sell options, we prefer to sell expensive options, which equates to selling high Implied Volatility (IV). We use IV rank to determine when IV is high compared to the underlying’s previous year of option prices. IV Rank = (Current IV – Minimum IV) / (Maximum IV – Minimum IV)

  • Intraday Reversal and Implied Volatility

    How often does the market reverse? Are indices more likely to reverse when implied volatility is high, or low? Trade reversals are defined as open higher reversals, in which the market opens above and then closes below the previous day’s close, or open lower reversal, in which the market opens below and then closes above […]

  • Butterflies: Regular and Broken

    Butterflies are a fun trade if you are looking to put a little more capital into the market, and have a neutral assumption on the stock. Normally, butterflies are set up Out-Of-The-Money so you pay a small debit for the trade, rather than collect a credit (I prefer to collect credit on most of my […]

  • The Key Tenets of Trading

    STRATEGY DIVERSIFICATION STAYING SMALL, TRADING OFTEN. UNCORRELATED UNDERLYINGS CONTRARIAN PLAYS

  • Outlier Detection

    Outliers are points that lie far away from other values. They are usually considered to be a 3 standard deviation move from the mean (assuming a normal distribution). The little m, or mu, as it is called, represents the average for the data set.