IVR

No-Error6436

On tastytrade you can add '.IVR' to the end of any ticker to see the historical IV rank on the chart, very handy

Oblivious-Speculator

IVR cause I'm a fkin idiot for buying a mortgage ETF, while the rate is hiking

birdbrainiac

IVR

notquitenuts

I would disagree and say that is not a good blanket statement…57% is wicked high for T and nothing for MARA. A better metric is IVR which tells you the range for that exact underlying.

1kfreedom

So I have a question for the geniuses. Is BAC a better buy to play earnings this week, even though it doesn't report this week? C and WFC report on the 12th. Here is a chart of WFC, C, BAC, WLF. [https://imgur.com/a/Nak6YEa](https://imgur.com/a/Nak6YEa) They all seem to move together and the earnings date are WFC's. The IVR Rank right now per Tasty Trade is 57.2 (C), 51.1 (WFC), 37.5 (WLF) and 36.5 (BAC). So that seems to indicate IV is higher on C and WFC. Just checked both are at 50% on the weeklies, closest strike. BAC IV is 28%. Or am I overthinking this? Thanks

No-Error6436

I really like tasty trade. The charting is servicable but not extraordinary or anything, and fundamental research is there but basic. I would lean elsewhere for fundamental research, but live data and options + analysis tools are very solid. Being able to quickly see expected move, volatility, IVR, analysing trades, and rolling positions makes it my favorate options platform

Capt_A_Hole

Nice guide. Would add that IVR and DTE are also important considerations on what strategy to use.

flynrider58

Thanks! I have used ToS to trade options for 10 years. I use custom column’s and also studies to time plot IV, HV, IVR, IVP. I have time plotted single options and multi-leg combos and know the theoretical price column in option trade tables. I would really appreciate some more info about how to time plot a theoretical option price. I guess it’s a thinkscript and can you share it?

K9US

Sell everything and buy IVR AGNC

sharpetwo

A quick reminder that IVR in and of itself isn't enough to take good trade on the volatility front. You need to first look at the variance risk premium (the difference between implied and realized volatility) and then add IV Rank. I talked about it in details [here](https://www.sharpetwo.com/p/blending-iv-rank-and-vrp-a-path-to) and demonstrate how you can reach sharpe 2, by combining the two effects. In that regards, marketcameleon is the probably the best out of those mention in the replies.

nivek_123k

DVN has been an excellent option vehicle up until about a week ago. The IVR is single digits, the premium has dried up. I would enter a new position below 45 again, but as it's popped recently I am no longer interested in new trades.

ZeeKayNJ

If you’ve traded options consistently you’d know what I’m talking about. Besides, IVR and IV percentile already give you the historical comparison.

realcactuspete

IV percentile and IV rank give you current IV compared to the historical IV over the last year. They are calculated a little differently but point to the same thing, i.e. how current IV compares to its range over the past year. Most platforms let you scan IV% or IVR

realcactuspete

They also have an API that you can query for various IV metrics, not just IVR. Very handy and coding isn't too difficult.

CodeMonkey1

I have an account with TastyTrade with no money in it, but I still use the app to monitor IVR and to set up trades.

notquitenuts

I find their IVR and liquidity rankings great. i love seeing the expected move laid on the strike chain, took me awhile to get used to it but now I don't think I could switch. Plus their content amazing imho. I listen to 2-3 shows everyday while commuting

nivek_123k

what is your target allocation on a total portfolio basis? my target on an individual company's stock is around 5% (i tend to focus more allocation on broad market, equal weight ETFs). I also suplement shares with stock options when it makes sense based on IVR and mechanics. if the target is 5%, and it's now 2.5%, then the answer is to DCA assuming you have a positive bias on the company. if the target is undecided, and you just threw some capital at the company with no thought on overweight/underweight holdings, then it's purely max pain... are you at max pain? It's only a loss if you sell sounds good as a quote, but the reality is the underlying now has to gain over 100% to near your break even at current prices. What fundamental data lends you to thinking the company can return that capital to shareholders before it makes sense to reallocate a portion/all of that capital to other underlyings?

quantumpencil

Yeah, but man... I build systems and AI models to try and automate things and it's a lot harder than one might imagine in the real world. Even things that seem simple, as soon as another person comes into the situation or problems get too complex and require significant understanding over a long period of time of any sort of process, especially one rooted in the real world and not easily renderable via some sort of embedding -- you pretty much get stuck at the last 10%. You end up with automated systems that are smarter and more natural and can do a bit more than scripted IVR type systems could do before (or, in other industries, equivalently powerful tools like code gen/completion that used more traditional AI methods prior to the LLM revolution that are pretty much worthless unless the human using them understands the task well enough to do it themselves and provide the right kind of instruciton/feedback. And getting past this point is extremely hard. Scaling the models has essentially been exhausted, so we're back to looking for meaningful architectural and specialization routines which is much tougher and slower. The actual future is white collar workers using AI to generate the majority of artifacts for their job as a starting point, but caring out that last 10% and stepping in to deal with failures. It will transform work -- but at least right now, it's not going to be replacing most work.

HebrewHammer225

If anything consider selling a portion and re-investing assuming IVR % and Volatility is presenting positive results and indication that you're positions will continue to prove fruitful.

Gotl0stinthesauce

Yes. But honestly, dude, we’re only two years into the AI hype. It’s not like we’ve been at this for years, and this isn’t crypto. AI has real and practical use cases that don’t require an overhaul of our banking system. It’s applicable today. The technology is moving so quickly; it's different every passing day. I’m around AI every day at my work, and from what I’ve seen, it’s mind-blowing. The automation power is just incredible, and it can be plugged into just about anything, assuming there’s an open API. It’s scalable and truly helps businesses cut down on mundane tasks, allowing humans to be deployed to more important tasks. The number of small businesses that are going to use AI to solve various problems (like reducing latency in IVR phone lines) is going to blow people’s minds. Gone are the days of needing a 50-100 person startup that requires massive capital to get started. Founders (if they can code) can launch a business in weeks or months by themselves. The AI boom hasn’t even started yet. Once we see companies based on chatGPT or today's LLM models going public, that’s when the fun will really begin. Nvidia to the moon 🌙

kRiTiKaLplays

Theta won't really impact you until 21dte... Since IV was in low 30s at the close, if it rebounds in the next week IVR will go higher and also the multiplier on the price. There was no crush for 4/19 expiry. There was also huge buying volume at this level back on Wednesday which probably means thay institutional money likes the entry $750. Expect it to bounce back up. I would hold it until next Friday then roll or manage a smaller loss depending on your conviction

patrickswayzemullet

Good morning boooozooooosssss.... We are starting green today with reasonably high IV and IVR on the index. 27.5 (a bit over 0.5%) expected move and 14 IVR... Good luck to all...

RotoHack

Could look at some of the miners like RIOT and MARA. The halving hurts these businesses and they already barely scrape by. Pull up a chart and theyve started decoupling. Also MSTR trades at an extreme premium to BTC and you'd think ppl wouldn't be dumb enough to choose MSTR > the ETFs now that they are available Care though and I'm sure IVR is high in all these names and any are a gamble

jaynostic

Options have built in leverage. A good estimate of that leverage is using the delta as a “stock replacement” ie an .85 delta call is approximately the same as buying 85 shares. See how the price of the call compares to the price of the share equivalent and that is your approximate leverage. If you buy at a time when the stock has a low IVR (volatility ranking against it’s own 1 year history) then anytime vol increases you get that kicker as well. The gotcha is theta. On long dated calls however this isn’t much concern.

kRiTiKaLplays

How's that? IV closed at 44% today which is low for the sector... As earnings approaches, the IVR will only increase. If you're getting in now, you're definitely not paying the for the IV, you're getting rewarded by it. The higher the IV, the higher the price per contract.

PapaCharlie9

> 52 week IV should be >30% (so the premium of the short put is higher) While you earn points for considering IV at all, a better way to do this is to compare the current IV to historical IV averages. 40% is greater than 30%, so that would pass your filter, but if the historical average is 80%, 40% is actually comparatively *low* and should have been screened out. The best IV to use is the IV of the short put contract vs. its history. Failing that, use the overall IV of the underlying stock vs. that history. Some brokers will list the overall [IV Rank or IV Percentile](https://www.projectfinance.com/iv-rank-percentile/), which does the historical comparison for. So if you have access to IVR or IVP, use that instead. > Short put strike price below stock's current market price (OTM) Specifically around 30 delta OTM. That's the sweet spot or risk/reward, based on backtesting. The delta of the short leg is perhaps one of the most important selection criteria, since the delta, the volatility (IV) of the contract, and the holding time together define your expected win rate. > Long put strike price below short put strike price (further OTM) This filter is a little silly, since a bull put spread requires that the long leg be structured this way. So it's implied by the structure itself. A better rule to have here is how far the long strike is from the short strike in dollars. That's the other most important selection criteria, the spread width in dollars, since it defines your risk/reward. Reward is the opening credit (some fraction of the spread width), and risk is the spread width minus the opening credit. > Short put strike price at a delta of around 0.2-0.28 (20-28%) That's fine, just understand that while you are increasing you win rate, you are decreasing your max profit. > Place long put strike around 1-2 strike prices (or around 5%) below short put strike No, see the above about strike width. A better criteria is minimum reward for the risk of the spread. For example, for a spread with a 67% win rate, you should aim for at least $.34 credit for every $1 of spread width. This is because the break-even at expiration for a 67% win rate spread is $.33 per dollar of width. So by shooting for $.34 or better, you are guaranteed to do better than break-even, in other words, profitable. Don't just pick widths at random or by some fixed rule like 5%. In practice, usually you are forced into a width by the strike interval (for example, if strikes are $5 apart, you can't have a spread that is only $3 wide). Therefore, you start with the spread widths that are possible, estimate the win rate for each, and then do the break-even calculation. The opening credit should be more than that break-even number. If you can't find a spread of that width with that reward, DO NOT TRADE THAT DAY. The market just isn't offering spreads that are worth trading. If that's all too complicated, a rule of thumb is: * Get the short put as close to 30 delta or 67% PoP as possible. * Get at least $.34 per dollar of spread width This is the famous Tasty "Credit should be at least 1/3 the spread width" rule of thumb. > In the bid-ask section, set LMT order with a credit of at least $1.0 per contract No. That is conditional on the width of the spread, as explained above. > Max loss to max gain ratio in the risk graph should be below 4. Again, this is conditional on the spread width and win rate of the spread. A risk/reward of 4 to 1 implies that the win rate of the spread has to be better than 20%. > Create an exit strategy for your trade so that you lose maximum 1.5 of what you can win, i.e. if you can win $100 on the trade, exit the trade so that you maximum allowable loss is below $150. This isn't strictly necessary, since you already baked the max loss into your risk/reward calculations. It's fine to have an early exit profit target, like 50% of the opening credit is typical, but I think it's better to have a **max holding time** exit, rather than a loss limit, since again, your loss is already limited by the structure of the spread. Since you don't want to hold spreads near expiration, an exit at 10 to 4 DTE, regardless of the profit or loss level, is typical.

Gentleman-Eng1neer

You described my selection criteria thus far pretty much on the nose. I've been filtering out low liquidity and then sorting by IVR, preferably above 60.  I'm curious how you determine whether directional risk is acceptable or not. Do you just keep delta range bound based on position size? How about bullish/bearish outlook? 

PapaCharlie9

I mean, you *want* the market to be bad at pricing OTM options, right? That's how you make money. But in this case I don't think it's the market that is missing the mark. It sounds more like you have an incomplete understanding about how to use ICs effectively. > Then there's the implications on IV mean reversion, where a low IVR stock/ETF will have a tendency of rising over time, and thus killing you on both Vega and delta. Only if you don't adjust your holding time. This is not a one-size-fits-all type of game. You have to adapt your tactics to market conditions as they change. Perhaps this is a failing of Tasty's educational outreach. They make it sound like you just do 45 DTE 15 delta SPY short strangles and the money just rolls in regardless. I promise you, they aren't so rigid. They adapt as the market changes.

Gentleman-Eng1neer

That intuitively makes sense, but implies that the market is bad at pricing OTM options, as probability ITM is a big factor in determining premium. That may be the case though. Then there's the implications on IV mean reversion, where a low IVR stock/ETF will have a tendency of rising over time, and thus killing you on both Vega and delta.

512165381

It may be but mean reversion with IVR is what tastytrade has been pushing. It may be more relevant with broad-based market indices. Personally I look at maximum drawdown over a year(s), as an alternative measure of dispersion to standard deviation. There are underlying assumptions like geometric Brownian motion, but I can't see that applies to oil or precious metals where there is seems to be a a floor in the price. I look at maximum drawdown very carefully.

tjclaussen

To take advantage of the usual 'reversion to the mean' (Per your edit on range) the max for a bought option or spread (when we want the IV to increase) will be low in the range. IV Percentile (i.e. IV%% on Tasytrade platform) tells us exactly where in the range IV is currently. Many use IVR as well but based on only 2 values (highest and lowest in period \[usually 1 year\]) IVR is skewed/inaccurate because of outlying (price pullback) IV spikes. IV Percentile uses all readings but not by value, only what % higher or lower. The buy sell line in IV Percentile is low for me as I am more of a seller and I start looking at long/bought spreads/options more when it gets in the low 20s or less.

Mellmuzan

IV doesn't matter much to me. I use IVR

randomaccuracy

I use IVR to decide what to sell and what to buy. IV itself is not 100% as some high beta stocks always have a high IV. Stock A can have IV in the range 10%-30%, stock B can have IV in the range 65-90%. I wouldn't buy options in A with IV at 30% but would totally buy options in B with IV at 60%. Coz the chance of IV increasing is high when B's IV is 60%.

sib2011

If you have the time and resources, I suggest you consider IVR more than IV. Tasty trade has this but it's essentially an IV/HV comparison.

notquitenuts

I am rarely a buyer unless I think vol is to low and I’m expecting expansion but I would use IVR over IV. 50% iv is a lot different in nvda or t….

OPINION_IS_REGARDED

Selling iron condors on Nvidia is the right play. 98% IVR and a median post earnings move of -0.04% over the last 5 years. Theta gang is eating well tonight.

Juannietrader

I think Tom would say use whatever works for you. Just know your mechanics - sell high IVR close to 45 days, roll at 21 DTE to reduce gamma risk and trade liquid options.

TryGeneral8301

I bought 200,000$ worth of assets with a 60,000$ margin account. I don’t understand how it’s possible. I bought multiple covered call positions using high IVR stocks and leaps. I tried understanding the logic of how my buying power is calculated and could not figure it out. I see I have a margin loan of 130,000$ (it took me a while to understand that this is negative cash, for some reason my broker marks this with parentheses instead of adding a minus sign 🤦‍♂️). My question is how did I get to a state where I could borrow 2 times my cash? Or stated differently, how come I still have more buying power???

uho

be careful looking at IVR btw. IVR doesn’t include realized volatility. you need to look at IV compared to current realized volatility

uho

be careful looking at IVR btw. IVR doesn’t include realized volatility. you need to look at IV compared to current realized volatility

nietzy

I did this on SMCI when IVR was over 110. I was considering it on NVDA too, but the BPR was much higher than SMCI for whatever reason, so I settled for a 670 short put.

nivek_123k

>Never be a Buyer of options; always be a Seller. i'd consider this: "If I buy an option, I sell something against it to maintain positive theta." sometimes IVR is low, and short premium is undesirable. in these instances a debit/diagonal/calendar is the smarter play.

Terrible_Champion298

I dismissed the overstated importance of IVR in the post. You apparently missed that.

Paper_Some

Take a look at this short video that explains why selling at high IVR is better. You have more return on capital and less risk selling at high IVR. These people spent over 40 years trading, so I’d listen to them. https://youtube.com/watch?v=XZWZ9tUDlM4

flynrider58

They use the “30d’ IV Index for IVR. A “VIX style” calculation compared to the same thing over the last year.

AlphaGiveth

When we are selling options we are really in the business of holding risk. Holding risk should have some sort of compensation (premium, think insurance). In the situation you shared, you want to be going pretty far out in time and you need to have a view that the level of implied volatility is infact too high. If realized vol is through the roof too, then it's possible that the premium is not too high. Keep in mind that in these scenarios the term structure is likely to be in backwardation since market is smart and should expect things to calm down eventually. What I am basically getting at is that no one is giving away free money. It's highly unlikely that some generic measure like IVR should make you money. Who is paying you because high IVR? Vol trading is the business of pricing risk. Hope this helps happy to discuss it more

value1024

99.99% of people don't know shit about option pricing, and whether the option they are trading is fairly priced or not, but they can understand simple concepts like IVR, moving averages, etc. IVR is a simple metric brokers came up with to get you interested in trading options. It is practically worthless. You will ask why I am guessing....well, because say historical IV is 30, and current IV is 50, IVR will be 100%. Say for the same stock, current IV is 80, IVR will be at 100 yet again. Does this make any sense? No it does not, hence IVR is worthless.

Paper_Some

Low IV means low premiums, and the tail risk is still there. What’s the point of selling and taking the risk when the payout is so low. The idea is that when you sell at high IVR with enough DTE, IV will contract, bringing the price down, and you will get to your profit target sooner.

sharpetwo

IVR is less than the variance risk premium (the difference between IV and realized volatility) when you trade options. You should start there. Here is a quick summary: IVR high - consider selling options - true if variance risk premium is high. IVR low - certainly not a good reason to sell options. Out of the two statements, this one has the most chances to be wrong and make you take losing trades.

m0nk_3y_gw

Yes, if buying OTM LEAPS then I look at IVR. If IVR is high but I like the price / expect a run then I buy ITM or spreads. In 2021 I bought 2-year OTM Tesla LEAPS. In two months the stock went up 50% ($800 to $1200) but my LEAPs tripled because the IVR went from 0% rank to 80%+. TSLA is now back 3% IVR, but I'm not expecting great new in the next few months, but I'm nibbling anyways The site I use is https://marketchameleon.com/Overview/TSLA/IV/

AlphaGiveth

IVR doesn't actually tell you if options are cheap or expensive, only if the the implied volatility is high or low. It's a subtle but extremely important difference. For example, low vol environments are actually good for selling options because future vol is relatively predictable. When vol spikes (IVR Increases) it can actually be bad because RV has shot past IV, market is trying to adjust, and vol tends to cluster (big moves today, big moves tomorrow). If you are running something systematic like selling puts on SPY then don't even think about IV rank just stick to the strategy. If you are trying to actually price vol and find cheap/expensive areas you'll probably want to dig a bit deeper.

thekoonbear

IVR can be useful but it’s somewhat hard to make an argument that IV from 52 weeks ago is really that relevant to IV now. It can be but a lot of times it’s can be from a completely different regime where it’s irrelevant. The concept of looking at IV as relative to history though is a good foundation to build off in trading vol. The next logical step is to look at IV ratios as they are much more consistent than outright levels of vol. As for trading spreads, especially tight ones, yeah outright vol matters much less. You have much much less vega risk with a structure like that so it follows that outright vol levels mean much less.

AKdemy

I don't think IVR is particularly useful. So far, I spent about 10 years as a derivatives quant but no one I came across used this concept.

voltrader85

This tasty trade article says a lot but leaves out some of the most critical details. Details such as “which option do you look at to determine IVR and IVP?” At least I didn’t find that in the article. Stocks do not have a single Implied Volatility. Each option on the chain has its own IV. This makes it difficult to draw inferences about long-dated options if you are monitoring metrics that are derived from short-dated options.

dharmatech

>I've never heard of or used IVR. Here's what I'm referring to by IV Rank: [https://www.tastylive.com/concepts-strategies/implied-volatility-rank-percentile](https://www.tastylive.com/concepts-strategies/implied-volatility-rank-percentile) And thanks for your thoughts u/RubiksPoint! 👍

RubiksPoint

>Now, the other day I saw someone say that if they're buying LEAPs, say one or two years out, they don't care about IVR at all. I've never heard of or used IVR. I'd argue though, that as you get into longer and longer dated options, the noise of the market dictates the value of the option less and less. IMO, the stock market in the short-term is almost purely noise, but in the long-term, good stocks/ETFs tend to go up. The reason someone purchasing LEAPs might not care about IVR is because they are expecting the market to move in the direction of their bet regardless of the volatility. This causes the volatility to be a less useful factor to consider when purchasing LEAPs. In this case, other factors, like the cost of leverage, are more valuable.

kRiTiKaLplays

you're leaving too much money on the table... but I'd recommend you watch some videos o IV covering IVR and IV crunch. It's not so much the jump in price that raises the value of a contract, but the implied volatility percentile coupled by directional moves.

Training_Baker5454

They’ve all been trash the last 1-2 years. MIST and MVIS were the last ones really profitable and even they dipped into the red last year. IVR had a reverse split and has been nosediving ever since.

ScottishTrader

Do you know about IV? [https://tickertape.tdameritrade.com/trading/historical-implied-volatility-options-strategies-15505](https://tickertape.tdameritrade.com/trading/historical-implied-volatility-options-strategies-15505) IV gets higher leading up to an ER, and higher IV means higher options prices. Once the ER is over IV Crushes and options prices plummet - [https://tickertape.tdameritrade.com/trading/implied-volatility-iv-crush-options-trading-18574](https://tickertape.tdameritrade.com/trading/implied-volatility-iv-crush-options-trading-18574) The ER for COST is still a month out and IV has already moved up from about 30% IVR on 1/26 to 50% now and may move up even more between now and the ER date. You may want to check prices as it gets closer. See this for more in IV Rank/Percentile - [https://tickertape.tdameritrade.com/tools/strategy-selection-iv-percentiles-15527](https://tickertape.tdameritrade.com/tools/strategy-selection-iv-percentiles-15527) A couple of items, one is that you are putting up $67K to possibly make $200, so keep that in mind. Another is that ERs only come around every 3 months, so while this may work out at times, the trading opportunity is only 4 times per year for any given stock.

Puzzleheaded_Fig3856

Vanguards website and app is ancient. Adding a takes days. After adding one bank, it won't let me add a second one as I recently added one.. over 2 weeks ago. Lol. I got frustrated and opened fidelity as I can still purchase vanguard ETF. It's infinitely better and customer service is outstanding. I messed up something while opening multiple accounts types, I called them and loved the IVR, customer service etc. they even call back to follow up. Their website has all the features that vanguard lacks. Transfers are available instantly to trade. Vanguard gives me an error saying funds are not settled while I am trying to purchase. No good faith purchase.  Now I have to figure out a way to transfer my funds from vanguard to fidelity but Vanguard doesn't provide a way to pull from external, just push. Even that I am not able to add since I have to wait for several weeks between adding,/linking banks. I applaud vanguard for pioneering their low cost ETFs and tac efficient admiral funds but geez. The technology is just not acceptable in these days and age of AI.

nivek_123k

/CL was in the $68 range early 2020. russia decides to exit opec instead of continue price fixing. price drops 20%. immediately following that the pandemic locks down the world.. /CL contract experiences the largest drop in history... trading near -$50. /ZB explodes to the 200 tick range. /ZB was hovering in the 160 tick range when the pandemic started in early 2020. rush out of equities into bonds coupled with the rampant money printing caused the bonds to explode in price as interest rates are erased. Think they topped out at 200, but stayed in that range for better part of the year. I believe I had strangles on both as IVR was elevated using perhaps 10% of my margin. When the strikes were breached and span margin kicked in due to basically end of world scenario, contracts are now 8x the margin requirements, are ITM, and the liquidity in that front month dried up as option clearing houses were ill equiped for the market destruction. some trade platforms could not even deal with the volume, let alone the negative pricing. There was article on a trader buying contracts at $0 not realizing it had breached $0 and was $50 lower. This is the year where I lost 50% of my net worth in the span of about 3 months. lost my apartment, had to sell stuff, had to find ways to survive. suicidal. so before you get into futures, know without a doubt what the notional value of the trade is. I would only touch a single contract on a future if my net worth was in the millions. same goes for SPX, NDX, RUT... know what those contracts are worth. now I only trade options with about 20% of my capital, at most 5% capital in a single option trade. NEVER will I trade in the futures market with less then $2-$3 million in capital.

marcusbrutus1

[https://www.youtube.com/watch?v=DMEKpnD0\_gM&t=27s](https://www.youtube.com/watch?v=DMEKpnD0_gM&t=27s) I thought this was interested, that low IVR makes it difficult to profit (in this case from 20 Delta strangles).

nivek_123k

IMO banks are still slightly above a price I'm willing to pay, but not so high I want to be short. i'm mostly looking at KRE, BAC, C, SCHW, and at a lesser extent XLF. another 10% discount and I'm interested in a small long position by selling naked puts, or buying bullish debit spreads based on the IVR. in contrast I am short QQQ, long VIX. My overall account is about 15% utilization in options. not a very interesting market at this time. most of my capital is sitting in bonds, treasuries, and dividend instruments. keep size in check. size kills. 2-3% per trade, and with VIX so depressed options are a less attractive instrument.

Hempdiddy

>IV rising alone is not likely to offset theta, I've read that pure volatility traders disagree with this. Volatility is supposedly the wind that can primarily impact all options pricing and ATM strikes are the sails which catch most of that wind. Seems like IVR is rising, but the volatility of my specific expiration cycle is not rising and has become a problem,.... for my supposed volatility trade.

Ed_Trucks_Head

UWM and IVR mortgage and lending

Hempdiddy

100% understand about calendars. I've dabbled in those as well and have some familiarity with them. One follow-up: vega increase COULD make a trade like this profitable without underlying movement right? I'm wondering why I dont understand the connection between IVR and IVx here. IVR is moving up nicely, but the IV in the specific term has been stagnant. I thought rising IVR would make this a nice long vega trade and it just isn't packing the punch I expected.

Hempdiddy

**Placed a long straddle to profit from rising volatility. Volatility is rising, but the value of my position is not.** 11 days ago BTO a 4/16/24 $50 call and a 4/16/24 $50 put (long straddle on CSCO underlying) solely to capture rising volatility before next earnings release on 2/14. IVR 5.3 at open. IVx 21% at open. (my broker defines IVx as the volatility per expiration cycle). Today, IVR is 45.3 and rising! Great! But wait, my position is currently a 5% loser. Why is rising implied volatility not making this position profitable (setting aside the lack of movement in the price of the underlying)? I expected rising volatility to make this profitable. IVR is much higher than open. However, IVx is still at 21%. I suppose I don't understand the relationship of IVR to IVx. My understanding is that vega should be most sensitive ATM and even more sensitive the further out in time you go. When underwriting this trade, this looked like I should be profitable today, but alas, I am not. Thank you for your help.

Lets_Go_Theta

I really like option strat. But there is one thing that really bothers me and that's the IV bar. For instance, if I had an 0dte iron condor on SPX today that's 100 pts wide, everything points to an IVR of 14.8. This includes tasty trade /Vix and /Vix9D. But optionstrat is showing me an IV of 21.3%. How can I possibly model anything out if I don't know why they have a wildly different IV than everywhere else in the market because then I don't know how to properly adjust it so that it matches what the IV could be. Do you have any information on this?

SerophiaMMO

Thank you for the response. During times when I don't see many tickers with high IVR that I like, would I use KC to determine how much to allocate to SPY put credit spreads while waiting... With theoretical 80/20 odds, and 130/370 win loss, KC says 23% of portfolio. That sounds about right for a lot of the times when technicals, fundamentals, VIX look good. So, somewhere in the middle of following KC and confirmation bias. I kinda do the same with Tastys guidance. I rarely blindly follow guidance and instead want to learn the "why" before I apply it. Plus, learning for the sake of learning is fun, no? Yes, good point about black scholes.

patrickswayzemullet

I was decimated through October selling put spread because I keep on thinking "ha, high IVR, priced in. don't worry about it eventually they stop bleeding, I might secure 25-50% profit easy" BUT NO. Rolling is only possible when you are slightly wrong... Like if you sold 30-wide SPX for say $11 credit weekly (this is like ATM on medium volatility)... You can only roll if SPX falls slowly to midway between your long leg and short leg... As you saw in October, they can chew up 30-50 points very quickly. At that point there is no credit to be had rolling... It's extremely possible to gain good money on short-term spreads if you have the trend behind you, but when you are wrong, rolling may not work.

let-it-rain-sunshine

I got some IVR for 6.60 and it's around $9 now, and pays good dividends.

RelevantSwordfish634

Same. Will even creep 30 when IVR over 80.

TanukiTrade

Ok, me too. 1/ I'm using /ES for far OTM naked put in bull market WITH MARGIN account (less BP), just for passive income if I have too much free BP. 2/ Wide strangle, if the IVR is high, because futures requires less BP than SPY or SPX. That's all. And another bonus: daytrading with /ES options isn't counting into PDT if you have account size less <$25k

cicada3322

Anything in the Financial sector. I'm about to go all in on mREIT's. It is the only sector that hasn't recovered since COVID. And MM is solidifying positions in the sector as we speak. We have been green off of word of possible interest rate cuts. Wait until it is actually confirmed. Collect dividends along the way into a parabolic movement up after home-buying season of 2024. Watch loan origination explode as the interest rate spread widens and they will be as thick as thieves on their balance sheets. All in on IVR since it's managed by Inveso.

redflavore

The option SHOULD be fairly priced for the probabilities and r:r ratio given. IV has a huge amount to do with pricing, so make sure to check indicators like IVR or IV percentile, to see if options are over or underpriced relative to the past year. Higher numbers mean overpriced, lower means underpriced. Back in July or August VFS popped to $80(this is a shit Vietnamese EV company), ATM puts traded around 30.00. ATM calls were far cheaper, I don't remember how much maybe 20.00 or 10.00. Everyone knew it would go down, but there was the risk of further upward growth, so calls traded pretty rich. For a bearish position puts seemed crazy to buy, they priced in like a 60% downward move. This means selling calls was a way to make big money here. The point is that option pricing is very dynamic and usually properly prices risk, the 0 sum and efficient market ideas. Everyone knows spy trends upward, look at calls trading twice that of puts at the one or two year expirations; options you buy or sell are probably priced efficiently and correctly. If you find a situation where they aren't, you can make money by selling expensive or buying cheap, but finding opportunity is tough. In the end, paying the mid is USUALLY okay, especially for liquid underlyings.

patrickswayzemullet

so when the IVR is low and it sells off 40, 50, 70! points... it's logical?

greytoc

I'm surprised to hear that Schwab is ending support for SSE. I use both ToS and SSE. It seems that ToS lacks a lot of the features that an equity swing trader would rely on. Re: Fidelity - you probably just got routed to the wrong place. You may just want to try a different option. My phone number is tied to their IVR when I call the active trading services so I likely have a different user experience. Fidelity ATP is actually not bad and is more similar to how SSE works. You can also try Ibrk and Tradestation. Their desktop trading software is pretty good too when I used them in the past.

warren_534

If you mean selling naked straddles, then it's not bad at all. Personally, I prefer to sell naked strangles immediately before the earnings release, assuming that IVR/IVP are extremely high, to take advantage of the IV crush. One can also do this with wide ICs instead.

notquitenuts

Selling an ITM or ATM CC are not TT mechanics, nor is selling options on a $11 stock with an IVR of 14 6 months out really...Not a comment on the quality of the trade, just pointing that out.

wendycoupon_4898

Yeah. For credit spreads, you are mostly looking for two things in IV. High IV rank or percentile and a large divergence between IV and historical IV. I use a filter similar to the way "The little book that beats the market" filters for stocks. I will get a list of the tickers with the highest IVR, this should be available from any broker, and assign a rank from 1 up. The lower the rank, the higher the IV. I then assign a second rank for the difference between IV and historical volatility, with the largest divergence also receiving the rank of 1. I multiply those together and then sort for the lowest combined rank. This should give you a large IV that is also decently higher than historical, meaning IV is likely overpriced and the delta/gamma risk will likely be smaller than expected but the theta will be higher than it should. I keep my short delta conservative, less than .15, and try to buy the long position so that I get the best theta effect without too much risk. I would recommend looking for ETFs with uncorrelated betas, specifically looking for indexes and those with European style options. Options on indexes are settled in cash at expiration, so there is no risk for receiving shares and early exercise, and European style options also don't have any risk for early expiration.

Assaaaad911

$IVR Guaranteed to lose it all

That_Guy_Brody

Not a great time to sell puts with the VIX so low. Maybe okay on some high IVR tickers but I would be weary

patrickswayzemullet

nah these were opened today, legged in and out. Max profit around 1.50. The bullish side was more aggressive at 1.20 max profit. The bearish sides were really rolled. So I opened -4580/4590 when I saw the IVR and EM for 0.6. Then as it retested downward, I closed for 0.45. Then reopened -4585/4595 for 0.20 (I know, silly, but x3 and was quite safe).

ElijahTheeProfit

Fidelity has a good IV% screener but not IVR

patrickswayzemullet

seriously 0.2% + very low IVR and we are talking about circuit breaker? continue gifting your put seller... he is about to pay off his student loan.

patrickswayzemullet

sure it does because you need more to hit a usual target if you have one. you want efficient capital spending right? we are also on IVR 1. so premiums are cheap.

SerophiaMMO

Yes, Delta, Gamma, and IVR

greytoc

In the US, "most" options are listed standardized contracts. The term "listed" means that they are on an exchange and traded through an exchange and various market centers. It also means that the option specifications are standardized. What is the "same" is the pricing information and settlement process. Access to market centers and choice of liquidity providers vary by broker - so that can cause differences in execution quality. Also, "fundamentals" are calculated from pricing data and option specifications, and these are not standardized. If you mean "fundamentals" such as theoretical pricing models - those are calculated and provided by the brokerage platform. A broker may choose to provide models which calculate and define concepts like IVR differently. However, well-known theorical models like Black-Scholes-Merton is commonly used so the differences are minor. So common first order derivatives like delta, vega, theta, rho will be similar.

SPXLiquidated

Good for short put verticals for direction. Not great to sell naked with the low IVR and BP reduction.

PapaCharlie9

> Is there a way to calculate contract value path sensitivity? I wouldn't say "calculate" so much as "estimate," but the more leverage in the trade, the more sensitive to path. More reading here: https://moontowermeta.com/path-how-compounding-alters-return-distributions/ > How do call sellers calculate volatility for calls on indexes like SPY? There are a variety of volatility metrics you can use, like IV, history of IV, IV averages like IVP and IVR, and specifically for SPY, VIX. > Is capital optimization achieved by buying calls a few months out (before the move) that capture 30%? Or is it better to buy monthly options to capture 10% (selling immediately upon a 10% gain irrespective of time left) and then roll the gains into more monthly 10% captures — doing this three times in total over two months? First you have to define what you mean by better. If leverage is what you are trying to optimize, you would buy as many OTM calls as you can afford. They don't even have to be ITM at the peak. All that matters is that they gain value relative to your cost basis. For example, say the 2000 peak for SPY was 155. That doesn't mean you need to buy 150 calls so that they would be ITM at the peak. You could buy 200 calls that are still deep OTM even at the peak. But if those 200 strike calls cost you $.01 each and the call goes up to $.02 at the peak SPY price of 155, that is a 100% profit. On the other hand, if dollar gains is what you want to optimize, you want the highest delta per call that you can afford. Since higher delta means more $ profit per $1 gain of SPY, but also means much higher cost to open, so lower leverage. > Are they unprepared bc it’s so statistically unlikely? Essentially, yes. Some will have hedged tail risk to some extent, so in a sense that is some preparation, but hedges cost money and it isn't cost-effective to always hedge low probability worst-case scenarios by 100%. They might probability-weight their worst-case, so that if they estimate a 3% chance of a big move like that, they might only insure 3% of their total portfolio value. Still, only 97% of the portfolio being exposed to the loss of the full move is better than 100%. > Would a 10% move in one month in an entire index wake them up to the fact that something unusual is happening (“quick, raise call prices”)? Of course. Arguably, the crash itself is driven by institutional investors dumping risky positions. A small move can trigger a much bigger correction if sentiment sours. Algos play a part, but I wouldn't say "mindless". Every major player will be watching the market minute by minute and making adjustment to their algos targets and limits frequently. You can think of algos and high frequency automated trading as throwing gasoline on a brushfire, turning it into a wildfire. > I’m still unprepared for the power of potential compounding and it’s just sheer size that‘s making me think I must be seriously missing something. If you do nothing else, acquire a deep and solid understanding of compounding. It will shape every other investing decision you make. More deep dives: https://www.reddit.com/r/options/comments/14kdmur/geometric_vs_arithmetic_mean_in_the_wild/ https://www.reddit.com/r/options/comments/14hzdal/solving_a_compounding_riddle_with_blackscholes/ https://www.reddit.com/r/options/comments/14jo0er/lessons_from_the_50_delta_option/

General_Syllabub_407

Options Newbie here: I was looking at $TGT weeklies and was interested in taking out a strangle position (92 Strike Put/124 Strike Call) because the IV is at \~78% (93% IVR) and I don't believe the stock will move as much in reaction to earnings (11/14/2023). Now, writing cash covered puts is pretty straightforward as I only have to put up cash. However, I do not want to write covered calls for this position as I don't want to be exposed to underlying price moves, which might decrease my P/L depending on how TGT moves. Is the only option to write a naked call? Unfortunately I got denied for trading naked calls. Whats the best solution for this?

patrickswayzemullet

The day had IVR 14 and EM of +-18. When it went down I sold -4345p. I closed for $100 gain leaving about $30-50. I just had that strange feelings. I also closed all the lotto butterflies. I was leaning for a stronger V just because NFP and stuff... but I heard about Powell but wasn't sure what it was gonna be. So I closed all the scalps and all the theta plays earlier. Sure enough.

need2fix2017

IVR.

SPXLiquidated

As far as screeners, Tasty has a watchlist on their platform called "High Options Volume." You really only need this list to see liquid option markets, and you can filter through metrics like IVR. A lot of ETFs and equities IVR came down a lot with that 3-4 day big rally, so everyone is pretty low relative. IV expands, contracts, and goes in lul states; as an option seller, you should be opportunistic when it does happen to spike. If you're starting off, pick some stock or ETF you enjoy and do a small trade. Maybe you will lose maybe you don't, but it will help you navigate the space.

SPXLiquidated

There really isn’t quality equities with high IVR right now, besides earnings.

_throw_away_2019

So if IVR drops 1 on avg most options should drop 1% closer to expiry ?

SPXLiquidated

Look at IVR, VIX, or even /VX to measure the contraction of IV intraday.

PseudoTsunami

Be careful with Tastytrade, I know so many people who have followed them blindly and lost quite a bit. Those guys are ex floor traders and they know everything about "how" to trade, but not "what" to trade, "when" to trade and "why." There's a reason every Wall Street firm has separate specialists for those aspects. Tastytrade tries to fill in those aspects with mechanical rules based criteria like 30 delta, 45d, high IVR, etc, which completely ignores fundamental, technical, economic, behavioral, contrarian knowledge, inputs. The TT guys are very good for teaching post trade risk management though, which is good because premium harvesting trades do blow up quite often. The #1 thing I would avoid is thinking high IVR signals a premium harvesting opportunity.

bittersweex

20 of the last 30 trading days on QQQ & 19 on SPY have had moves outside the expected. There's something fundamentally broken in the market right now for long straddles and strangles to be almost consistently profitable. It's an awful time to be an option seller and I can't for the life of me figure out what's causing this. VIX @ 15 in this macro is just laughable. IVR below average when we're seeing more >1% moves than not is just crazy.

SPXLiquidated

Vol came in the past 2-3 days a lot so yea its about accurate. IVR went from about 60 to 24 for SPX