Saturday, June 26, 2010

Updated Daily Summary Chart

First and foremost, I’d like to thank the fellows from Dan Sheridan’s Florida Trading Group for their weekly meetings. I can’t attend the meetings but have made a point to download the audio and listen to their discussions every week. A few weeks back they presented what I thought was a great idea: A monitoring spreadsheet to monitor daily movement in relationship to volatility, sounds familiar? :)

Well, the difference is that they were tracking the underlying movement from High to Low, instead of just from close to close. I also liked the fact they were capturing historical data to get a sense for trending. The questions their study answers: how often have we moved over 1 standard deviation (from high to low) during the past 30 days? Is this trending up or down?

With that, I’ve made a bit of adjustments on my own daily tracking spreadsheet. While I do not track the implied volatility as the FTG folks do (I track a 20-day historical volatility), the data I have allows me to take the same sort of measuring and plot this in a trend chart. So there we have it, the updated Daily Summary sheet now will tell us how many times (in percent) has the underlying moved over 1 standard deviation for the past 30 days. For trending, all I had to do is to capture this value for every day and display the results for the past 120 days and displays it in a line chart.

This can potentially serve as a great way to measure when the storms are coming.

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