I looked into it and it looks like the dates are not matching up. I was on 2/6/2018 and the picture on tos is on the expiration of the chain I chose for ONE. Here is the TOS lookback...Wayne, I share your approach to trading research. I also try to go my way instead of following somebody else footsteps. Like you, I leave open all the time possibility to be wrong and would love somebody proved me wrong. Just I expect proof to be logical not sort of 'everybody knows'. I sense a lot of misunderstanding about IV graphs and it's meaning out in the public. I can't be sure though because discussion about this is practically non existent. Maybe I struggle with obvious things. So, do not take any critique personally. I hope Jim and Gary can explain more why they object to adding IV. I oppose it as well as a general indicator for structures evaluation, but for different than mathematical reasons. I didn't look at it in the past and I will now. There is a chance that it became quick and dirty, 'good enough' method in _some_ cases.
Re 2018. I'm not questioning your observations. I was simply wonder if you did any statistical analysis of this period. I did not, I do not see a value for my trading in doing that (I'm focused on shorter terms). This days I relay, like you, more on observation and understanding than on statistics. I don't use your '1/2 IV ATM' method. I generally do not like to operate in delta space (having delta or sigma as x axis) but what I be looking at is not only rise but strike distance and atm IV level and try to extract useful info from combination of all of that.
I'm happy that this conversation happens. I hope it will last for a while. I'm convinced that exchange of thoughts is an excellent way to push understanding forward. I want to point out to one issue we should take into consideration if we continue. You use ONE. Gary and I stopped using it while ago, I do not know about Jim. Issue is this:
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This pic is taken from TOS' On Demand. Take a look at iv levels in comparison to ONE from the pic you posted above. I have about the same values as TOS from my database. I do not know what settings do you use in ONE but iv values are quite different. I do not care about perfect accuracy of iv and greeks (yet another river to jump into ) but what we see can not be ignored and should be addressed in the future if we to go beyond conceptual things.
Thanks for your feedback on the presentation. You hit the nail on the head with it being only conceptual. The presentation was to bring up the subject of skew and see how it effects the risk of trades that are "market nuetral". One of the main considerations a hope people could take away was that there is a variable effecting credit selling strategies that is rarely, if ever looked at. If any options trader were to look at their own result and collect the skew data in a form that makes sense and is normalized they might conclude a correlation to decreases probability or even higher volatility in their results and be able to take action accordingly to increase or decrease risk at the start of the trade.I was able to finally take a look at the presentation after it was posted in the library late
I can't say I got much out of it
It would have been more interesting if there was some actionable trades presented otherwise it is just a concept
I am not sure if there was any difference in the skew before the crash in OCT 2018 that could have predicted the price drop or somehow take advantage of it
There are other trades that could have been made (more directional) if there was a way of knowing in advance which way the market will go
Another problem in 2018 was that SPX was going mostly in one direction up so the butterfly would always had to be adjusted to keep from loosing on the upside until October
What is the takeaway from this analysis ? Is this just something to look at or can some trade be made based on the skew shape ?
What if the skew changes after you place the trade ? Do you adjust based on the IV ?
That is true but I could tell that from the premium received at a certain distance from the ATM when trading put credit spreads" risk is too high for the credit being received."
in my mind, this is a much more intuitive approach to understanding skew. the way i learned it is thatWayne is correct about premium for OTM spreads being a form of skew probing. I use it myself as well.
marcas, is that a hint for me to do more work or are you volunteering?Jim, good question about how much 1 IV point jump is worth. Your calculations can give some numbers but to get broader picture they need to be run on much bigger scale. I say that change in price highly depends on dte and on initial IV levels.