Author Topic: Upgrading from The Options Matrix  (Read 462 times)

Offline TradingAdmin

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Upgrading from The Options Matrix
« on: September 21, 2016, 06:52:46 pm »
If you are an Options Matrix user, you are already familiar with trading options.  You know that there are thousands of options to choose from and you have the necessary tools to search through those options to find the ones you are interested in.  You have some tools to analyse the option, plan your trading strategy, enter the trade and monitor it.

You will know about volatility, you know how if you sold options, you want the volatility to drop and vice versa..- if you bought options you want the volatility to increase (enabling you to sell at a higher price than what you paid for it).

Trading in options you would have experienced volatility first hand.  At times you would have sold options, just to find that even though time goes by and the options are supposed to decay (time-decay) the prices stay stubbornly high - you Matrix Position chart would have predicted that you should have been sitting on a nice profit, however in reality you find you can't get out of the trade, the prices have gone up and you are stuck with the option. 

With the Matrix you could analyse the effect of volatility, but you had no way of telling beforehand whether the volatility of a specific commodity, at the time you were looking at it, was high or low, relatively speaking....

This is one of the mayor changes that Options Explorer brings to the table:  It includes methods to analyse let's call it the relative strength of the IV of a commodity.  We are able to calculate, using historical data, at what levels of IV each commodity has traded over the past year.  Knowing this information, we are able to tell, looking at the current IV at which the commodity is trading, whether the current IV is high or low (relative to its historical high and low).  We are also able to plot, over the past year, at what times did it trade at a high IV and when at a low IV. 

In Options Explorer the IV calculation happens automatically in the background (with your data import), and it makes available the IV history as an easily accessible graph, for example:

 

Crude Oil for example we can see is trading at its lowest IV in the past year - in other words Crude Oil options are very cheap at the moment.  The IV for Soybeans are on their way down, so is Coffee..

Options Explorer now gives us insight into "how expensive" the IV of an option that we are evaluating is, relative to where it used to trade at over the last year.  For each option we are now able to tell whether the IV that we are seeing is cheap, or whether it is expensive.  Previously you did not have that information!  You traded Oil and "hoped" the IV would come down - yes you had all kinds of tools to analyse what it would do to your portfolio if the IV did change, - but now you can see that Oil is currently very cheap, it is unlikely that the IV will come down, as a matter of fact, if anything the IV of Crude will probably rise (probability favours a rise in the IV).

This is one of the most significant changes from the Options Matrix.  You now have insight into how expensive or how cheap each commodity is priced BEFORE you make a decision on whether you want to participate in this market or not!!     
« Last Edit: January 26, 2017, 12:17:03 pm by TradingAdmin »