Tag: derivatives

Computing Option Skews with Dask

Post Outline * Introduction * Links + Datasets * Notebook * Next Steps Introduction This article series provides an opportunity to move towards more interactive analysis. My plan is to integrate more Jupyter notebooks and Github repos into my research/publishing workflow. For datasets that are too big to share through github I will provide a download link both here and in the github readme. I will be posting the notebooks into this blog using iframes. If you experience any issues with f

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How To Get Free Intraday Options Data With Pandas-DataReader

Post Outline * Purpose * Intuitive explanation * Code * Next Steps Purpose This is a simple reference article for readers that might wonder where I get/got my options data from. In this regard I would like to shout out the contributors to the pandas-datareader, without their efforts this process would be much more complex. Intuitive Explanation So this code consists of three components. The first is the actual script that wraps the pandas-datareader functions and downloads the options

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Exploring Our Scraped Options Data Bid-Ask Spreads (Part-2)

Post Outline * Notes on Part-2 * The Data * Bid-Ask Spread Analysis * How Do Aggregate Bid-Ask Spreads Vary with Days To Expiration? * How Do Bid-Ask Spreads Vary with Volume? * How Do Bid-Ask Spreads Vary with Volatility? * Summary Conclusions Notes on Part-2 Some astute readers in the comments noted that analysis based on the absolute difference in bid-ask price is not robust when considering the price of the underlying option and can lead to spurious conclusions. They recomme

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Backtesting the Implied Volatility Long/Short Strategy (12/31/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

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Backtesting the Implied Volatility Long/Short Strategy (12/06/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

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Backtesting the Implied Volatility Long/Short Strategy (11/16/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

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Does Factor Rank Matter for the Implied Volatility Skew Strategy?

Post Outline * Strategy Summary * Results * Conclusions/Analysis Strategy Summary First, if you're unfamiliar with the Implied Volatility Skew Strategy you can find a recent deep dive into the strategy and its performance here. In this short post, I look at the effect of using only the top N ranked ETFs from each Long/Short portfolio. In this case, N is equal to 3. This is an arbitrary selection and this study could be done with the top 1, 2, 4, etc. This differs from the original strate

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Backtesting the Implied Volatility Long/Short Strategy (10/18/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

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Backtesting the Implied Volatility Strategy - A Deeper Dive (10/03/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) * Deep Dive into the Weekly Strategy using Quantopian's Pyfolio * Strategy Concerns Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their

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Backtesting the Implied Volatility Long/Short Strategy (9/27/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

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Backtesting the Implied Volatility Long/Short Strategy (9/20/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts individual equity returns up to 6 months! ABSTRACT Stocks exhi

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Backtesting the Implied Volatility Long/Short Strategy (9/14/16)

Post Outline * Strategy Restart * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Restart After a ~2 month pause, the implied volatility long/short strategy has returned! If you were previously unaware this strategy relied on aggregating free options data via the now defunct Yahoo Finance Options API. After some time I was able to track down another free, reliable, source for options data via Bar

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Backtesting the Implied Volatility Long/Short Strategy (7/12/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Update (Target Leverage=1) * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts ind

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Backtesting the Implied Volatility Long/Short Strategy (7/6/16)

Post Outline * Strategy Summary * References * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Update (Target Leverage=1) * 1-Week Holding Period Strategy Updated (Target Leverage=2) Strategy Summary This is a stylized implementation of the strategy described in the research paper titled "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. The authors show that their SKEW factor predicts ind

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Backtesting the Implied Volatility Long/Short Strategy (6/28/16)

Post Outline * 4-Week Holding Period Strategy Update * 1-Week Holding Period Strategy Update (Target Leverage=1) * 1-Week Holding Period Strategy Updated (Target Leverage=2) 4-Week Holding Period Strategy Update Download the spreadsheet here. 1-Week Holding Period Strategy Update (Target Leverage=1) Results simulated using quantopian platform 1-Week Holding Period Strategy Update (Target Leverage=2) RESULTS SIMULATED USING QUANTOPIAN PLATFORM I'll post the components of each of the

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Updating the Implied Volatility L/S Strategy (6/21/2016)

There are two versions of this strategy that I have previously tracked and reported. The original strategy consists of forming weekly portfolios each held for a period of four (4) weeks before being liquidated. The second strategy is a higher frequency version which forms weekly portfolios with a holding period of one (1) week. Thus far, both strategies have exceeded expectations. Their apparent theoretical success is so far beyond expectations it required much deeper investigation and better si

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (6/04/16)

To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name e

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (5/31/16)

To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name e

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (5/21/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by fol

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (5/14/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by fol

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (5/08/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by fol

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (4/30/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by fol

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (4/24/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by fol

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (4/17/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by fol

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (4/09/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by fol

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (4/02/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by fol

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/29/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by f

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/19/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by f

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/14/16)

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by f

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/05/16)

#block-yui_3_17_2_2_1457211500463_15952 .social-icons-style-border .sqs-svg-icon--wrapper { box-shadow: 0 0 0 2px inset; border: none; } FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smir

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (2/27/16)

#block-yui_3_17_2_1_1456604859059_182762 .social-icons-style-border .sqs-svg-icon--wrapper { box-shadow: 0 0 0 2px inset; border: none; } FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smi

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (2/20/16)

#block-yui_3_17_2_3_1456020426677_22579 .social-icons-style-border .sqs-svg-icon--wrapper { box-shadow: 0 0 0 2px inset; border: none; } FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smir

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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (2/13/16)

#block-yui_3_17_2_4_1455397888451_24737 .social-icons-style-border .sqs-svg-icon--wrapper { box-shadow: 0 0 0 2px inset; border: none; } FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smir

READ MORE →

USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (2/06/16)

To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name

READ MORE →

USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (1/30/16)

To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name

READ MORE →

USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (1/23/16)

To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name

READ MORE →

USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (1/17/16)

To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name

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USING IMPLIED VOLATILITY TO PREDICT EQUITY/ETF RETURNS (1/11/16)

To see the origin of this series click here In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns") the authors research shows that Option Volatility Smirk they calculate is predictive up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. I will then track the results of the Long/Short portfolio, in equity returns, cumulatively fo

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Using R to Chart Shadow Banking Components

Previously I wrote a primer on the shadow banking markets. In this post I follow up by attempting to chart and analyze the components. Surprisingly (or not) it proved more difficult than I anticipated to construct the components charts. First finding good data series that could serve as a proxy was time consuming. Additionally some of the data series that helped in deconstructing the market in the past were discontinued. I also had to merge data from several sources. Keep in mind this is definit

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WHO RUNS THE MARKET?

A simple question, often overlooked to the investors' detriment.... In my ongoing pursuit to gain an edge in the market I’ve often thought it critical to analyze who the key players are. But even more broadly and perhaps of greater importance, I’ve often considered who or what forces have the power to “move the markets”. As a casual observer, or "unsophisticated" investor the most common market news you may encounter is pundits discussing stocks and the stock market, earnings reports, the FED an

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