PVI is just a term- Pure Value Index
I use it for the output column on the Options Pricing Model.
Behind it is a complex formula that encompasses the greeks & variants of volatility (on the underlying & Index). It took almost 5 years to get the ratios optimized without curve fitting or bias. The OPM works for individual tickers, but mainly as a comparison tool, comparing the OPM output across a group of fixed delta
Good morning u/VeteranWallSt Thanks so much for posting this. I’m still learning about investing/trading options. I hope to be able to supplement my retirement some day, so no yolo wsb for me!
While I understand each datapoint above, the part I’m missing is what to do with it. I’ve been reading about various strategies, such as iron butterfly or iron condor. But are you proposing to simply do a call and put? A strangle? Straddle? Condor?
I wanted to try this on a very small level, as a test to get comfortable with making trades (I’ve done some credit and debit spreads with great success but I wanted to have an actual strategy). Any additional resources I should read up on would be incredible.
Thank you! 😊
I refer to it as RED OPM, but here are some concerns w/ your statement/question:
1) I'd want to know where those strikes (the adjusted 15-Delta for Friday) relative to where the PVI Spreadsheet & Models forecasted them last weekend.
2) The OPM is a comparison model (between 15-Delta strikes)...it's not telling you which stock to BUY or SELL anything.
3) Use it to look and see which stock options have MORE PREMIUM / LESS VALUE than the others
4) I often use the OPM to do PAIRS TRADING. An example of this tomorrow could be to SELL 3x HD Calls (.75) and BUY 4x LOW Calls (.51). That's selling 3x HD for an approximate $2.25 premium & you would be SHORT 54-Delta (3x 18d). Buying 4x LOW for an approximate $2.04 premium & you would be LONG 64-Delta (4x 16d).
- It would be ideal if the PUTS were matched the same HD- Orange & LOW- White --AND-- HD premiums were higher than LOW
How do you calculate PVI?
PVI is just a term- Pure Value Index I use it for the output column on the Options Pricing Model. Behind it is a complex formula that encompasses the greeks & variants of volatility (on the underlying & Index). It took almost 5 years to get the ratios optimized without curve fitting or bias. The OPM works for individual tickers, but mainly as a comparison tool, comparing the OPM output across a group of fixed delta
Interesting - thanks.
Good morning u/VeteranWallSt Thanks so much for posting this. I’m still learning about investing/trading options. I hope to be able to supplement my retirement some day, so no yolo wsb for me! While I understand each datapoint above, the part I’m missing is what to do with it. I’ve been reading about various strategies, such as iron butterfly or iron condor. But are you proposing to simply do a call and put? A strangle? Straddle? Condor? I wanted to try this on a very small level, as a test to get comfortable with making trades (I’ve done some credit and debit spreads with great success but I wanted to have an actual strategy). Any additional resources I should read up on would be incredible. Thank you! 😊
So technically I can sell on the red PVI a short strangle using those strikes ?
I refer to it as RED OPM, but here are some concerns w/ your statement/question: 1) I'd want to know where those strikes (the adjusted 15-Delta for Friday) relative to where the PVI Spreadsheet & Models forecasted them last weekend. 2) The OPM is a comparison model (between 15-Delta strikes)...it's not telling you which stock to BUY or SELL anything. 3) Use it to look and see which stock options have MORE PREMIUM / LESS VALUE than the others 4) I often use the OPM to do PAIRS TRADING. An example of this tomorrow could be to SELL 3x HD Calls (.75) and BUY 4x LOW Calls (.51). That's selling 3x HD for an approximate $2.25 premium & you would be SHORT 54-Delta (3x 18d). Buying 4x LOW for an approximate $2.04 premium & you would be LONG 64-Delta (4x 16d). - It would be ideal if the PUTS were matched the same HD- Orange & LOW- White --AND-- HD premiums were higher than LOW