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Price and Volatility Playbook

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Anand Biradar
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58 views8 pages

Price and Volatility Playbook

Uploaded by

Anand Biradar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLS, PDF, TXT or read online on Scribd
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Notes Changed VXO to VXN for use with NDX.

Results trade the volatility indices in the opposite direction from the stock indices.

-----Original Message-----
From: Larry Connors [mailto:l.connors@tradingmarkets.com]
Sent: Friday, May 06, 2005 9:32 AM
To: davidwei@ix.netcom.com
Subject: RE: Research Project

Great David, thanks. When you show the changes in price and Vix use raw numbers and also % change.

-----Original Message-----
From: David Weilmuenster [mailto:davidwei@ix.netcom.com]
Sent: Friday, May 06, 2005 9:18 AM
To: 'Larry Connors'
Cc: cesar@alvarez.com
Subject: RE: Research Project

Will do. Target completion over weekend.

No questions for now.

David

-----Original Message-----
From: Larry Connors [mailto:l.connors@tradingmarkets.com]
Sent: Friday, May 06, 2005 9:05 AM
To: Larry Connors; davidwei@ix.netcom.com
Cc: cesar@alvarez.com
Subject: RE: Research Project

The test should run 1/1/95-3/31/05

-----Original Message-----
From: Larry Connors [mailto:l.connors@tradingmarkets.com]
Sent: Friday, May 06, 2005 9:04 AM
To: davidwei@ix.netcom.com
Cc: cesar@alvarez.com
Subject: Research Project

Hi David,
We're going to now focus the research in order to support an Options Trading College which will be run by Joe Corona who wa

To start, can you create a spreasheet for us with the following parameters:

1. Behavior of the SPX (NDX) and the Vix (and VXO) when the VIX (VXO) is x %
(5%-25%) above (below) its 5 day ma, 10 day ma and 20 day ma. We'll look at 3
days, 5 days and 10 days and 20 days of behavior. We'll also look at
behavior until the Vix (VXO) closes on the other side of its x day ma (we'll look at x+1 day too as volatility tends to overshoot

Joe is going to create options strategies from this data.

Please call me today if you have any questions. Also, I'm in Palm Springs this weekend for a tournament so I won't have emai

Thanks,

Larry

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un by Joe Corona who was Tony Saliba's head trader for a number of years. Our research role will be us simply looking at prices of securiti

olatility tends to overshoot its mean).

ment so I won't have email beginning tomorrow morning, but I will be available by cell (310-592-0631).
ooking at prices of securities and the Vix, not options.
Symbol

Avg Length of Volatility


Profit # Avg Avg % Bars % of Volatility vs. MA
No. Factor Trades Profit/Loss Profit/Loss Held Winners MA (%)
SPX 14 1.40 89 2.55 0.15 4.0 46.1 10 (10)
SPX 18 0.93 243 (0.54) (0.10) 4.0 41.6 10 (5)
SPX 26 1.42 240 3.19 0.30 4.0 57.5 10 5
SPX 30 1.09 117 0.79 0.12 4.0 53.9 10 10
SPX 58 1.27 78 2.63 0.14 6.0 48.7 10 (10)
SPX 62 0.98 192 (0.17) (0.09) 6.0 44.8 10 (5)
SPX 70 1.33 187 2.93 0.34 6.0 56.2 10 5
SPX 74 1.43 98 3.98 0.50 6.0 59.2 10 10
SPX 102 0.65 64 (5.62) (0.67) 11.0 37.5 10 (10)
SPX 106 0.99 141 (0.20) (0.20) 11.0 44.7 10 (5)
SPX 114 1.64 137 6.73 0.75 11.0 64.2 10 5
SPX 118 1.34 82 4.38 0.70 11.0 58.5 10 10
SPX 146 0.67 51 (6.93) (1.05) 21.0 31.4 10 (10)
SPX 150 0.48 88 (12.07) (1.38) 21.0 29.6 10 (5)
SPX 158 1.46 89 8.34 1.05 20.8 62.9 10 5
SPX 162 1.45 58 7.75 1.07 21.0 62.1 10 10
VIX 14 2.69 89 0.78 3.56 4.0 65.2 10 (10)
VIX 18 1.52 243 0.31 1.81 4.0 52.7 10 (5)
VIX 26 1.80 239 0.63 2.39 4.0 62.3 10 5
VIX 30 1.70 117 0.67 2.37 4.0 61.5 10 10
VIX 58 2.92 78 1.10 4.94 6.0 65.4 10 (10)
VIX 62 1.67 192 0.47 2.59 6.0 53.7 10 (5)
VIX 70 1.87 188 0.76 2.63 6.0 64.9 10 5
VIX 74 2.03 98 1.15 3.74 6.0 65.3 10 10
VIX 102 1.58 64 0.54 3.57 11.0 50.0 10 (10)
VIX 106 2.18 141 0.87 4.68 11.0 60.3 10 (5)
VIX 114 1.66 138 0.76 2.43 11.0 66.7 10 5
VIX 118 1.48 82 0.75 2.68 10.9 67.1 10 10
VIX 146 1.48 51 0.53 3.88 21.0 58.8 10 (10)
VIX 150 1.15 88 0.20 2.60 21.0 48.9 10 (5)
VIX 158 1.25 90 0.40 0.97 20.7 56.7 10 5
VIX 162 1.35 59 0.65 1.83 20.7 59.3 10 10
Stop Method:
Time Stop
1= TimeStop, (Bars): Bars Since
2= Volatility 1= 3, 2= 5, Volatility
Crossover 3= 10,4= 20 Crossover
1 1 0
1 1 0
1 1 0
1 1 0
1 2 0
1 2 0
1 2 0
1 2 0
1 3 0
1 3 0
1 3 0
1 3 0
1 4 0
1 4 0
1 4 0
1 4 0
1 1 0
1 1 0
1 1 0
1 1 0
1 2 0
1 2 0
1 2 0
1 2 0
1 3 0
1 3 0
1 3 0
1 3 0
1 4 0
1 4 0
1 4 0
1 4 0
Exectiming = 0;//Optimize("Timing of Executions",0,0,1,1); // 0 = Same Bar on Close, 1 = Next Bar on Open
Volatilitymawnd = Optimize("Length of Volatility MA",10,5,20,5);
Volatilitythresh = Optimize("Volatility vs. MA (%)",5,-25,25,5);
Stopmethod = Optimize("Stop Method: 1= TimeStop, 2= Volatility Crossover",2,1,1,1);
Timestop = Optimize("Time Stop (Bars): 1= 3, 2= 5,3= 10,4= 20",0,1,4,1);
Crossoverbars = Optimize("Bars Since Volatility Crossover",0,0,0,1);

SetOption("InitialEquity",100000);
SetOption("CommissionMode",1);
SetOption("CommissionAmount",0);
SetOption("MaxOpenPositions",1);
SetOption("MarginRequirement",100);
SetOption("UsePrevBarEquityForPosSizing",False);
SetOption("AllowPositionShrinking" , True);
SetOption("AllowSameBarExit",False);
SetTradeDelays(Exectiming,Exectiming,Exectiming,Exectiming);
BuyPrice = SellPrice = ShortPrice = CoverPrice = IIf(exectiming==0,C,O);
SetPositionSize(1,spsShares);
RoundLotSize = 1;

SetForeign("VIX--X");Vix = C;RestorePriceArrays();
SetForeign("VXN--X");Vxn = C;RestorePriceArrays();

Volindex = IIf(Name()=="SP-500" OR Name()=="VIX--X",Vix,Vxn);

Volatilityma = MA(Volindex,Volatilitymawnd);

Buy = IIf(Name()=="SP-500" OR Name()=="NDX--X",


Volatilitythresh>0 AND Volindex>=(1+volatilitythresh/100)*Volatilityma,
IIf(Name()=="VIX--X" OR Name()=="VXN--X",
Volatilitythresh<0 AND Volindex<=(1+Volatilitythresh/100)*Volatilityma,
False
)
);

Sell = IIf(stopmethod==1,False,
BarsSince(IIf(Name()=="SP-500" OR Name()=="NDX--X",Cross(volatilityma,Volindex),
IIf(Name()=="VIX--X" OR Name()=="VXN--X",Cross(Volindex,volatilityma),
False
)
)
)==Crossoverbars);

Short = IIf(Name()=="SP-500" OR Name()=="NDX--X",


Volatilitythresh<0 AND Volindex<=(1+volatilitythresh/100)*Volatilityma,
IIf(Name()=="VIX--X" OR Name()=="VXN--X",
Volatilitythresh>0 AND Volindex>=(1+Volatilitythresh/100)*Volatilityma,
False
)
);

Cover = IIf(stopmethod==1,False,
BarsSince(IIf(Name()=="SP-500" OR Name()=="NDX--X",Cross(Volindex,volatilityma),
IIf(Name()=="VIX--X" OR Name()=="VXN--X",Cross(volatilityma,Volindex),
False
)
)
)==Crossoverbars);

ApplyStop(stopTypeNBar,IIf(stopmethod==1,stopModeBars,stopModeDisable),
IIf(timestop==1,3,IIf(timestop==2,5,IIf(timestop==3,10,IIf(timestop==4,20,0))))
);

Plot(Volindex,"Volatility Index",colorBlue,styleLine);
Plot(Volatilityma,"Volatility MA",colorRed,styleLine);
Plot((1+volatilitythresh/100)*Volatilityma,"Volatility Thresh",colorGreen,styleLine);

Filter=ExRem(Buy,Sell)-ExRem(Short,Cover)!=0;
AddColumn(Year(),"Year",5.0);
AddColumn(Month(),"Month",5.0);
AddColumn(ExRem(Buy,Sell)-ExRem(Short,Cover),"Buy/Short",5.2);
AddColumn(Volindex,"Volatility Index",5.2);
AddColumn(Vix,"VIX",5.2);
AddColumn(Vxn,"VXN",5.2);

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