Hey @Sensibull and other friends
I was playing around live IV chart with CE and PE , I noticed , whenever the market falls , both CE and PE IV increases, and when market rises both iv decreases.
This happens 80% of the time. Other times IV randomly increases and decreases.
As far as I understand , when the market falls , there must be lots of PE buyers and panic pe sellers , they short cover , so PE value and IV increases.
But Why do CE IV shoot up ?
IV is fear indicator.
Ppl fear more downfall than upmove.
Easy to sell existing portfolio in falling market than buying in bull market.
In below , when market falls today at 1 pm , pe value increasing, but ce value not decreasing , ce buyers must panic and close positions right.
Yes , but am talking about IV in options.
Increase in IV indicate that buying pressure is increasing.
If CEs have greater IV than PEs means overall traders are buying more of CEs than PEs.
yupe I know what is IV , please read my question.
Price is shooting up , CE IV increases , PE IV decreases
Price is falling down , PE IV increases , CE IV also increases
On the other hand in rising market
Increase in CE IV is obvious.
But PE IVs reduce because
IV is fear factor, right?
So even in falling market offer prices for CEs are not cheap as writers know that in these uncertain conditions risk is high and hence premium demanded must be high.
In options selling is always less due to comparatively high capital required as compared to buying. So even in falling market selling pressure in CEs will be comparatively low than buying pressure in PEs.
Thus buying in PEs increase their IV.
But in CEs combination of
Now gone buying + selling which is anyhow always low + high premiums demanded by writers = also cause increase in IV
IMHO.
IV refers to implied volatility, it changes with change in price of a particular stock / Index. It measures daily price change. IV reflects market pressure therefore it increases when the market is falling. An ideal IV should be below 20.
Maybe you are telling about vix…let me tell what’s is IV since I use blacksholes model to derive IV… It’s nothing but when we have certain inputs to blacksholes it gives iv… basically it tells if options are over brought or over sold…
Lol, have you heard about other 3 factors? Study them!
what 3 factor , just 6 parameters and I just told two important parameters.
You are asking why options behave like this? Options dont work on your parameters. There is specific study material available on options. Also, your strategy revolves around volitality. Thus, you left delta thega and gama. What do you think they have no role?
Lol , dude again understand what am saying , yea right Delta is more in PE , compared to PE , or whatever bla bla greeks…
My question is why CE and PE behaving differently…
I believe like @ maddy_Des said , fear to protect the downside of their portfolio, many buying PUT compared to call.
This is bizzare reason buying puts because your investments going down.blah blah. And there is no explanation for your question if you’re going to throw every greek in trash can. How put has more delta?
I dont know , That is why I asked the question and got that answer , if you know please share your knowledge.
spot Price is shooting up , CE IV increases , PE IV decreases
spot Price is falling down , PE IV increases , CE IV also increases
Investors dont buy puts because there is no derivatives more than 200 stocks. What will you do about others. You want returns from small cap and risk from index. This is so idiotic.
See this chart , brown line is IV , blue line is option , yellow line is spot…
Did you notice , whenever price is falling CE IV is increasing ? Its not the same in PE
But PE IV is in sync with option and spot price.
What is the source of iv?
blacksholes , python library . its accurate , I have checked with NSE , sensibul , black IV plotted based on spot like NSE , brow IV plotted based on future like sensibul.
Dont use sensibull and custom calculator. Quantsapp has best iv calculation. Use that, also if was trading in stocks i will rather use future iv not options iv. But in index it is opposite. You have to look for volume, where it is? In option or future.
