Volatility Bands

[adesh]

I would like to know if anybody has some ideas on how to do these bands.

They are standard deviation bands which are static and based on the closing price.

They use the avg of the implied volatility of the at the money put and call and broken down to a daily number which when added to the close price will encompass the standard deviation of 1, 1,28, 1.5, and 2.0

the calculation is (standard deviation) x 0523421 (daily contstant) x Avg implied volatility (aVG implied volatility of at the money put and call dIvided by 2)

The bands are added to the daily chart closing price so that it gives some good probability zones based on implied volatility .

so its

1.0 (1.28, 1.5, 2.0) standard deviation x avg implied volatility of at the money put and call x .0523421 = x points added/subtracted to yesterdays close

you add and subtract the number from the close and you get a band for each of the standard deviations on a dilay chart.

Any assistance will be greatly appreciate and returned in kind if I can. I have extensive knowledge of logistics of trading FX markets and exotic options as I work for a market maker and would be willing to impart a large portion of knowledge as most traders are new to this market.

Randy

[its1111]

bands

Hi Adesh
I don't know if you are aware or not, but Kevin Haggerty sells the bands on Trading markets web site for I believe 100 bucks a month. It would be nice to get them for free though. I use them and they are very good.
Mark

[bernard]

Re: bands

I know http://www.protradingsystems.com/ has this tool, but I'm looking for an EFS... maybe it's not possible unless we have a function to get the options data? Any idea?

[gspiker]

bernard,

I know of at least three different "volatility bands", so I'm not sure which one is supported at the site you mention. However, in the one described by adesh earlier in this thread EFS would clearly need to be able to get option data in order to calculate it.

Garth

[bernard]

Hi gspiker, this is the one:

http://www.elitetrader.com/vb/showthread.php?threadid=32851

hopefully, the thread will not be deleted.

[gspiker]

Hi bernard,

I couldn't find any formula or even good verbal description on how those bands were formed. The fact that they did say that the bands are produced from "outside" data does indicate that this may not be possible at the moment with EFS, even if we did know the exact formula. The fact that they said that the "outside" data is "very expensive" leads me to belive that it isn't just option data...as that isn't "very expensive".

A small correction to my last post however...if you can create a file with the option data, or other "outside" data, you do have a method for getting it to EFS. I have been playing with doing this for some indicators that are produced outside of eSignal, as a way of making a integrated trading system with other EFS's I have. This could be a real pain to do if you can't automate the creating/updating of the data files from the outside source and if you need that in some short interval. But if you can automate, or if you only need hourly, daily or greater then it isn't too bad.

Garth