-dewitte

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-dewitte

Other suggestions or links to software that can do this would be appreciated . Thanks in advance .

-dewitte

dewitte said:

-dewitte

I've written my own real-time programme for options on indices in Excel. And it is a laborious exercise. Perseverance is the key. However, once completed you may agree with me that trading volatility is the best strategy for options.

Some feeds provide iv's but is questionable - constant volatility (where's the smile?), wrong model (Black-Scholes for futures options). I suspect this facility is available from the better providers - Reuters, Bloomberg - but it isn't cheap.

Let me know if I can provide more details.

Grant said:I've written my own real-time programme for options on indices in Excel. And it is a laborious exercise. Perseverance is the key. However, once completed you may agree with me that trading volatility is the best strategy for options.

Some feeds provide iv's but is questionable - constant volatility (where's the smile?), wrong model (Black-Scholes for futures options). I suspect this facility is available from the better providers - Reuters, Bloomberg - but it isn't cheap.

Let me know if I can provide more details.

Hi Grant

Which data feed are you using as input to Excel ? Mytrack ?

I have a real-time spreadsheet (care of a friend) which uses Mytrack data for FTSE (European-style)

Would be interested in inserting an IV engine if you have the code.

Glenn

Glenn said:Hi Grant

Which data feed are you using as input to Excel ? Mytrack ?

I have a real-time spreadsheet (care of a friend) which uses Mytrack data for FTSE (European-style)

Would be interested in inserting an IV engine if you have the code.

Glenn

Glenn,

Not quite as simple as that - it's a question of magnitude.

Re the FTSE. You will be looking around twenty strikes (or more) per expiry x 2 (bid and ask) x 2 (puts and calls) x 3 (at least) expiries = 240 separate implied calculations. Plus 240 dde's.

Next (although not in a strict order), you need to determine whether the premiums (bid/ask) are at a discount, ie trading below intrinsic value, or zero iv. If so, iv cannot be determined. Then you have to overcome the limitations of Excel.

However, once completed, it can be applied to any index - FTSE, DAX, STOXX, CAC, SMI and and those in the colony across the pond.

A slightly simpler version - and just as useful - would simply calculate iv's of last trades. Or implieds derived from the mid (although the validity of the results with far out-or-the-money options - in percentage terms, big spreads - may be questionable). And combining the two (although duplication would not be total) would show whether there were any buyers (sellers) at a particular implied; if not, would the premiums be lowered (raised)?

Then you need to identify and isolate the best potential positions (or strategies if you use these). And on it goes.

Send me your e-mail and I'll supply an Excel example for calculating IV (only one option per time). It would be straightforward to run it real-time via dde. If you want the main programme, you'll need to re-mortgage (but I'll help where I can).

First off, I am a math guy but not a programmer.

The regular approach to calculating implied volatility is a Newton Raphson search. This is an iteration that tends to be rather time consuming. There are however complex analytical approximations that do a fast and excellent job as long as the inputs are not too extreme (like way out of the money or close to expiration). I am familiar with the latest developments in this field.

My interest is not in calculating an index’s IV but real-time plotting IV on one contract. Getting the data in Excel is not a problem but how do I convert these constantly updating cells into a real-time chart? I guess this is primarily an Excel/VBA issue.

Btw here is a free Excel add-in that calculates IV and Greeks using iterations (bottom of page zip file)

http://www.iimahd.ernet.in/~jrvarma/software.html#download

though I expect that a fast iv approximation will be necessary for the charts especially when following multiple contracts. I may be wrong but I think iterations simply won’t keep up with the real-time data.

Reading the above posts, I am wondering if there are programmers among us interested in co-developing this?

-dewitte

As mentioned before, Bloomberg terminal probably excessively expensive for most punters.

I had the fortune to use it for many years when employed by a broking firm, but too expensive a tool to purchase trading on my tod!

IMO all that would be needed to use any one of the existing charting applications to calculate and plot iv’s would be the ability to:

-define custom indicators

-use more than one securities’ data in one indicator (in this case reference the underlying stock’s last trade)

-use a securities’ (the option’s) BID and ASK in the indicator definition (instead of OHLC)

Question to Paul (Trader333): can Tradestation do all three?

-dewitte

Being a maths (like my good self) you should easily be able to program such a simple algorithm in VB in excel..........plus if you use third party stuff then there might be flaws in the code!!!!!

One uses the BS as the market assumes it when calculating the IV......it doesn't matter if you are running a stoch vol maodel to price, as if you are implying the vol from the market everyone uses BS to do this.....Grant is getting confused on this issue as the smile is implied by the market.......Grant if you need any help with this give me a shout.....What model do you use to imply your vol???? smile when implying a vol!!!!!! he he he he

Also what is this about zero vol if the price is purely intrinsic??? Yeah near expiry.....what about if we have 6 month to go and you are OTM....??? you will be pure time value, hense vol is there!!!!

Limitations in Excel??? Limitations in your coding more like!!!!!! Just write the stuff in VB (the excel background) and you can write anything (if you want to get really tech then use a .dll and C++)

Enjoy

-define custom indicators

-use more than one securities’ data in one indicator (in this case reference the underlying stock’s last trade)

-use a securities’ (the option’s) BID and ASK in the indicator definition (instead of OHLC)

Question to Paul (Trader333): can Tradestation do all three?

I havent tried it and depending upon your datafeed, then Yes I think it can be done in Tradestation

Paul

Trader333 said:dewitte,

I havent tried it and depending upon your datafeed, then Yes I think it can be done in Tradestation

Paul

Great news Paul, but are you sure about the third condition:

-use a securities’ (the option’s) BID and ASK in the indicator definition (instead of OHLC)

??

-dewitte

Robertral,

We have several discussions entangled here, which is fine, but let me focus on my request which concerns simple REAL-TIME BID/ASK IV CHARTS.

As an example here an attachment made after market close (a 5 sec. chart), importing an option’s bid & ask as if it were low & high (middle pane). These data together with the underlying’s “last” (upper pane) are all that is needed to calculate and plot both iv’s in the lower pane (plus of course strike, days and interest, set constant during one day).

In this case no iterations were used but a fast approximation that does a wonderful job of indicating relative iv levels (though again, it might even work with Newton-Raphson).

Trivial? Sure, no big deal. Too easy? Then why has none of the charting packages it included? (AFAIK. Does KOBRA/REUTERS? The iv --CHARTING-- that is)?

A simple algorithm in VB in excel? I stand proud: I am not familiar with VB. But help me along and write me such simple algorithm, possibly only for the lower pane but preferably for all three, nicely time-aligned as in attached chart. And working real-time of course. Then I'll tell you how to scalp your way to riches while the rest is focussing on Iron Condors!

-dewitte

We have several discussions entangled here, which is fine, but let me focus on my request which concerns simple REAL-TIME BID/ASK IV CHARTS.

As an example here an attachment made after market close (a 5 sec. chart), importing an option’s bid & ask as if it were low & high (middle pane). These data together with the underlying’s “last” (upper pane) are all that is needed to calculate and plot both iv’s in the lower pane (plus of course strike, days and interest, set constant during one day).

In this case no iterations were used but a fast approximation that does a wonderful job of indicating relative iv levels (though again, it might even work with Newton-Raphson).

Trivial? Sure, no big deal. Too easy? Then why has none of the charting packages it included? (AFAIK. Does KOBRA/REUTERS? The iv --CHARTING-- that is)?

A simple algorithm in VB in excel? I stand proud: I am not familiar with VB. But help me along and write me such simple algorithm, possibly only for the lower pane but preferably for all three, nicely time-aligned as in attached chart. And working real-time of course. Then I'll tell you how to scalp your way to riches while the rest is focussing on Iron Condors!

-dewitte

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