For you that like to take trade insights by looking at the option chain.
What do you do? What kind of inefficiencies you can look for to trade and how to spot them?
Sorry, I read your title as “anal size” and did a double-take.
It depends on what edge you are trying to exploit. If you are exploiting vol mispricing, you’re going to be looking for IV pricing that is out of line with your own vol forecasting. If you are just looking for the cheapest delta you can buy for a directional play, your focus will be on the bid/ask spread and the delta of each strike. And so on.
Terrible_Champion298 on
That title is awful. And hilarious. Spilling matters.
This question is more of a hardware thing for me. I prefer vertical mounted monitors. Touch of a button, the chain will fill the screen. Looking at it in its full length makes the anomalies stand out. Scanning the spreads vertically, start counting: 6, 6, 6, 8, 5, 6. Return to the 8, ask, “Why?” Does this meet the need? What are the predictions for that time? ER? Dividend? If it checks out, that’s the entry. ATM wins a lot.
This is most often a new position move, and most often short. Usually, I need a certain range of expiry to keep churning options in an existing position, and I’m consulting the chain like a normal person. Look. Choose. Analysize. Pass/Fail.
adamantiumtrader on
I think kitty kat man did some option chain anal sizing this weekend…. 🤪
3 Comments
Sorry, I read your title as “anal size” and did a double-take.
It depends on what edge you are trying to exploit. If you are exploiting vol mispricing, you’re going to be looking for IV pricing that is out of line with your own vol forecasting. If you are just looking for the cheapest delta you can buy for a directional play, your focus will be on the bid/ask spread and the delta of each strike. And so on.
That title is awful. And hilarious. Spilling matters.
This question is more of a hardware thing for me. I prefer vertical mounted monitors. Touch of a button, the chain will fill the screen. Looking at it in its full length makes the anomalies stand out. Scanning the spreads vertically, start counting: 6, 6, 6, 8, 5, 6. Return to the 8, ask, “Why?” Does this meet the need? What are the predictions for that time? ER? Dividend? If it checks out, that’s the entry. ATM wins a lot.
This is most often a new position move, and most often short. Usually, I need a certain range of expiry to keep churning options in an existing position, and I’m consulting the chain like a normal person. Look. Choose. Analysize. Pass/Fail.
I think kitty kat man did some option chain anal sizing this weekend…. 🤪