20day Forecast: Regression forecast of underlying asset volatility for the next 20 trading days. The regression uses fundamental data, technical data, implied volatility and asset volatility. 20day ATM Implied Volatility: estimate of the "front-month" at-the-money market implied option volatility. Estimated by fitting a patent pending proprietary inter-month curve through at-the-money market implied monthly volatilities (dependant variable) and time to expiration (independent variable). The volatility observed on the curve at the point where time to expiration equals 20 trading days is the 20day ATM Implied Volatility. Asset Volatility: Historical volatility based on tick data; calculated by obtaining a simulated scalping profit on a long gamma position and comparing the profit to the cost of that position; previous methods for calculating: close-to-close, high-low and high-low-close. ATM: at-the-money; at the 50 delta call and put; at the straddle Best Channel: Best-fitting technical channel; format = minimum days required to form channel/days since current channel began. Units = trading days Call OTM : a measure of the extra premium added to the value of the out-of-the-money calls to increase their value above those implied by a 'smile' only defined with strike slope and derivative ; lottery effect on calls. Units = trading currency. Cost of 1000 gamma: Straight-line daily decay of a theoretical +1000 gamma option position with time to expiration greater than 200 calendar days and strikes at all points across conceivable range of the underlying security. Delta Hedging: the process of adjusting an underlying security position to profit from price movements (in the case of a long gamma position) or to minimize the risk of price movements (in the case of a short gamma position); trading the underlying security so as to maintain a delta neutral option position. see also: scalping Derivative: a measure of the rate at which the strike slope is changes with every 10 point increase in the call delta within the intra-month skew;measures the curvature of the intra-month skew or 'smile'. Units: percentage of the ATM volatility. Earnings Announcement Date: Estimated date of next periodic earnings announcement. Not verified by Option Research and Technology Services. Earnings Effect Factor: calculated by dividing the Asset Volatility (measured on the day of and the day following an earnings announcement) divided by the forecast of underlying asset volatility for those two days. The factor that is displayed is a combination of the average and median observations of this factor over all the earnings announcements studied with extra weighting given to the most recent observations. To estimate the volatility of the two days around the next earnings announcement, multiply the 20day Forecast by this factor. Gamma: A measurement of the change in delta, given a unit change in the underlying security price. Hedge Interval: the amount that the security's price is allowed to move between adjustments of the underlying position for the purposes of delta hedging. There are two commonly used types: fixed increment (for example: $0.50) or the daily standard deviation of the security multiplied by a factor (for example: standard deviation multiplied by 50%). Implied 20 Day: estimate of the "front-month" at-the-money market implied option volatility. Estimated by fitting a patent pending proprietary inter-month curve through at-the-money market implied monthly volatilities (dependant variable) and time to expiration (independent variable). The volatility observed on the curve at the point where time to expiration equals 20 trading days is the 20day ATM Implied Volatility. Implied Forecast: Forecast of where the Implied 20 Day will be trading in 20 trading days. a.k.a Implied in 20 Days. LongTerm Implied a.k.a. Infinite ATM Implied Volatility: estimate of the very long term at-the-money market implied option volatility. Estimated by fitting a patent pending proprietary inter-month curve through at-the-money market implied monthly volatilities (dependant variable) and time to expiration (independent variable). The volatility observed on the curve at the point where time to expiration equals infinity is the Infinite At-The-Money Implied Volatility a.k.a LongTerm Implied Infinite Forecast: Forecast of infinite volatility or volatility that the asset will revert to. Use with the 20day Forecast to develop an inter-month skew (volatility surface). Most
Persistent Channel: the current technical channel with the greatest
ratio between days in the channel and minimum channel length; format =
"minimum days required to form channel/days since current channel
began"; units = trading days Option Professional: an individual who can answer yes to any one of the following questions:
Profit on 1000 gamma: Scalping profit on a +1000 gamma theoretical option position using a delta neutral hedging strategy. The hedging strategy assumes adjusting the underlying asset position so as to have a zero delta at the market open and close. Between the open and the close, the deltas are hedged every hedge interval. Put-Call Parity: the mathematical relationship between the theoretical value of a call and a put; formula: call price + strike price = put price + stock price + interest (on strike price) - dividends.
Put OTM : a measure of the extra premium added to the value of the out-of-the-money puts to increase their value above those implied by a 'smile' only defined with strike slope and derivative ; lottery effect on puts. Units = trading currency. Resistance: The upper bound in the current technical channel. To calculate resistance for the next trading day, add the current channel's slope to today's resistance price. Scalping: the process of adjusting an underlying security position to profit from price movements (in the case of a long position) or to minimize the risk of price movements (in the case of a short gamma position); trading the underlying security so as to maintain a delta neutral option position. see also: delta hedging Score: ranks how well the equity compares to the average equity based on the multiple criteria that have been chosen in the Searcher. Value can range from 0 to infinity, although most values are between 0 and 3. If IBM's score is 2.0, it means that, on average, IBM is two standard deviations better than the average observation for the criteria chosen. Seasonal Effect Factor: Asset Volatility measured during a period of seasonally high or low volatility divided by the unadjusted forecast of underlying asset volatility for that period; one of the factors that can be used to summarize or set the implied volatility surface or skew. Skew: refers to the shape of the implied volatility surface; how much the implied volatility of each strike differs from the Black-Scholes assumption of constant or flat volatility. Straddle: An option position that includes one call and one put at the same strike (usually the ATM strike) with the same time to expiration. Strike Slope: a measure of the amount that implied volatility changes for every 10 point increase in the call delta within the intra-month skew; measures how lopsided the 'smile' or 'smirk' is. Units: percentage of the ATM volatility.
Standard Deviation: daily volatility converted into the trading units of the asset. To calculate the standard deviation of an asset for one trading day divide the annualized volatility by the square root of 252 (the number of trading days in a year) then multiply by the underlying security price. Support: Base price in the technical channel. To calculate support for the next trading day, add the current channel's slope to today's support price. |