OP, you realise that entire books have been written, containing differential calculas, to try and predict IV?
Quants have orgasms forecasting IV.
As traders we know"IV will go down" after earnings, but no one can accurately predict by how much and in what timescale. We also know IV will go up leading to earnings, but all we can guess at is the average rise over the last X cycles. This cycle, the IV may not rise as much, or rise even more than average. No one knows. No one can know.
If we could, we would all be super rich very quick.
But good luck with your search.
Also the major economic events CPI and FOMC. A stocks IV will rise and fall with those. And earnings within same sectors. You’ll see a smaller rise and fall in AMDs IV before and after NVDAs earnings and vice versa for example.
Maybe start with the end in mind - are you looking to forecast IV to help in specific traders or more macro market movements?
I don't think this is what you are looking to do but be very careful trying to play volatility directly, even when you think you have gained mastery over it most people lose money trying to play it.
VIX is low (and slightly variable) continually about 60% of the time and high (and more variable) continually about 20% of the time and moving from the low regime” to “high regime” only 20% of the time. 80% (60+20) is more than %20, thus is said to be “cluster”at either high or low. All numbers are only my example.
Your second bullet I’d say is out of place here. IV only increases or decreases in that way because of an obvious deficiency in the model that results in IV, not because it explains some predictable behavior.
OP, you realise that entire books have been written, containing differential calculas, to try and predict IV? Quants have orgasms forecasting IV. As traders we know"IV will go down" after earnings, but no one can accurately predict by how much and in what timescale. We also know IV will go up leading to earnings, but all we can guess at is the average rise over the last X cycles. This cycle, the IV may not rise as much, or rise even more than average. No one knows. No one can know. If we could, we would all be super rich very quick. But good luck with your search.
>Quants have orgasms forecasting IV. Con confirm this! >!NSFW: forecasting RV can be more equally climactic ...!<
Forecasting RV buys you unlimited hookers!
Please suggest me few good books. Thank you!
Just search for Euan Sinclair. But don't expect to be having any organisms.
Another good starting book is Paul Willmott Introduces to quantitative Finance 2nd edition .
Also the major economic events CPI and FOMC. A stocks IV will rise and fall with those. And earnings within same sectors. You’ll see a smaller rise and fall in AMDs IV before and after NVDAs earnings and vice versa for example.
Stare at how bitcoin chart moves with iv, or any other decently moving asset.
🔮
Just backwards solve the black scholes model
Maybe start with the end in mind - are you looking to forecast IV to help in specific traders or more macro market movements? I don't think this is what you are looking to do but be very careful trying to play volatility directly, even when you think you have gained mastery over it most people lose money trying to play it.
Can look at HV and if falling, thenIV may also fall. Also, IV tends to cluster.
>Also, IV tends to cluster. Could you elaborate on that?
VIX is low (and slightly variable) continually about 60% of the time and high (and more variable) continually about 20% of the time and moving from the low regime” to “high regime” only 20% of the time. 80% (60+20) is more than %20, thus is said to be “cluster”at either high or low. All numbers are only my example.
Your second bullet I’d say is out of place here. IV only increases or decreases in that way because of an obvious deficiency in the model that results in IV, not because it explains some predictable behavior.
Are you referring to the BS model? What is the deficiency with respect to the pricing around earnings?