Wednesday, March 6th 2019
Our Special Historical Volatility Calculation at ORATS
ORATS calculates historical volatility sometimes called statistical volatility intraday and ex-earnings and compares to implied volatility for related ETFs
ORATS calculates historical volatility from intraday data to produce accurate daily volatilities and effective forecasts of volatility for nearly 5000 US equity options. They also present ex-earnings historical volatility and ratios of implied volatility to historical volatility and related ETFs.
Setting ORATS Apart with Historical Volatility Research
Our proprietary historical volatilities are calculated from intraday data market information produce more accurate daily volatilities than traditional methods like close-to-close. From these accurate volatilities, we produce effective forecasts of volatility and other useful datasets.
ORATS covers all US equity options including stocks, ETFs, and indexes--nearly 5000 tickers. We characterize each symbol as a stock, ETF or index and we determine whether it is easy or hard to borrow and a dividend payer or not.
Historical Volatility Research
To make a forecast of a variable, one must first take measurements of it. The common methods of measuring underlying volatility are close-to-close, high-low, high-low-close and GARCH. Over many years of trading, Matt Amberson, our President, and CEO, was never satisfied with any these approaches. Based on our extensive analysis, we believe we have found the most accurate historical volatility measure available using intraday analysis. Another advantage of intraday volatility readings is that a one-day volatility can be calculated. The use of shorter term volatilities can help see a change in volatility before longer term measurements. ORATS utilizes a modified open high low close intraday volatility calculation.
Related Data Points in our API: or1dHv, or5dHv, cls5dHv
Ex-Earnings Historical Volatility
Close-to-close and ORATS intraday historical volatilities are also presented with the day of and day after earnings taken out of the calculation. These calculations are important as they can be compared over time or when analyzing a non-earnings expiration.
Related Data Point(s): xErnOr5dHv, xErncls5dHv
Implied Volatility & Historical Volatility Ratios
An important indicator is how the implied volatility is trading in relation to the historical volatility. ORATS presents this and another special calculation related ETF calculation. It is useful to compare that ratio to the related ETF ratio to see if the ratio is high or low.
Related Data Points from our Data API:
ivAvg1mXErnHvRatio = IV 30-day / HV20xErn Ratio current vs monthly average
ivAvg1yXErnHvRatio= IV 30-day / HV20xErn Ratio current vs yearly average
ivStdev1yHvXErnRatio= Stdev of IV 30-day / HV20xErn Ratio current vs monthly average
etfIvXErnHvRatio= IV 30-day / HV20xErn Ratio divided by ETF IV 30-day / HV20d ratio
etfIvAvg1mHvXErnRatio= IV 30-day / HV20xErn Ratio divided by ETF IV 30-day / HV20d ratio month average
etfIvAvg1yHvXErnRatio= IV 30-day / HV20xErn Ratio divided by ETF IV 30-day / HV20d ratio year average
etfIvStdev1yXErnHvRatio= Stdev of IV 30-day / HV20xErn Ratio divided by ETF IV 30-day / HV20d ratio year average
Options pricing models produce theoretical values for options and implied volatilities. Here we show common methods for calculating IV and how to interpret them.
Implied volatility, contango, and forward volatility can be used to predict underlying movement. Ex-earnings IV for stocks is explained. Backwardation is described as is the flat volatility method.