Volatility Blog getvolatility.com news, options market analysis

Trading options on this week's earnings releases

We put together the quick table below to help you navigate this week’s major earnings releases. We show the post-earnings stock price moves that are implied by options on each company and also highlight how often options markets were wrong in the past, where stock prices immediately moved more than was implied after earnings.

Click the expected moves below to view the full analysis for each company.

Expected Move Options Wrong Last 6m Chg
Apple 4.1% 30.0% -9.0%
Twitter 10.5% 61.5% +10.2%
Facebook 6.2% 41.9% +8.3%
Coke 2.6% 50.0% -2.2%
Boeing 3.3% 60.7% +0.2%
Google 4.7% 47.4% -2.4%
Amazon 7.2% 32.8% +17.8%
MA 3.3% 18.6% -4.4%
Baidu 7.0% 24.3% -17.6%
Exxon 3.0% 43.4% +6.9%
UPS 2.7% 56.8% +3.1%

Options backtesting equity curves and histograms

We’re announcing today the addition of equity curves and histograms to our options backtesting results to help you better evaluate and uncover attractive trading strategies.

Our equity curves show cumulative profit/loss for your options backtest and make it even easier to understand your strategy’s historical returns and drawdowns through time. In seconds, you can understand the net trend of your options strategy and whether it would have been profitable historically.

Backtest histograms show the frequency distribution of outcomes to help you quickly discern the historical probabilities of specific profit/loss events. This helps you easily visualize tail events and understand whether your strategy’s historical returns are clustered around certain levels.

Together, these two new backtesting features will help you swiftly optimize and discover options strategies on Volatility.

Options backtesting equity curves and histograms

Systematic options backtesting update

We’ve added the ability to backtest systematic strategies by option moneyness (strike price relative to underlying price). This is particularly useful for evaluating options strategies you trade at precise price levels, such as consistently selling 5% out of the money strangles Choose between option delta or moneyness in Calculation Type settings within Advanced Parameters in the backtester. This update gives you even greater flexibility over your options backtests.

Put vs. call options skew is at the highest level in seven years

As the Fed meeting kicks off and we lead up to the Brexit vote, put protection is trading at the most expensive levels relative to upside calls over the past seven years (chart below). But with put option transaction volumes healthily below their median levels, the upcoming news events haven’t led to a notable surge in investors looking to hedge equities. With many staying on the sidelines, today’s options pricing presents opportunities with attractive backtesting results depending on your directional view:

Longs: Consumer Discretionary (XLY) Risk Reversals

Put writers: Biotech (XBI), Nike (NKE)

Covered call writers: Twitter (TWTR), Viacom (VIAB)

Hedgers: S&P 500 Put Spreads

Option put call skew

Announcing targets, stop losses, public beta, and more

Options backtesting with targets and stop losses

Targets and stop losses have been your most requested features over the last couple months, and we’re very excited to finally bring them to you. You can now set targets and stops for every backtest you run on Volatility, even systematic strategies and earnings trades. You can also choose to include or exclude estimated liquidation costs for stop losses.

Try it now and send us your feedback!

Backtest your custom prices

Another important backtesting update we’re releasing today is the ability to enter custom prices for options in your backtests. This allows you to easily backtest and evaluate live prices you see in the market intraday. A couple other benefits include helping you find the best levels to place your limit orders or helping you better understand the impact of bid/ask spreads on your strategy’s performance.

Public beta and thank you

We are also announcing a shift from private to public beta today. Your friends and colleagues can now more easily try Volatility, and we’re looking forward to hearing their feedback.

Finally, we want to sincerely thank you for being a part of our private beta and for helping us make Volatility into an essential tool for options traders. Looking forward, we will be launching Volatility out of beta soon. To show our appreciation for all your feedback and help, we’re offering you discounts on plans for a limited time. Learn more here.