Friday, September 17, 2010

Volatility Comparison Charts

In Livevol's newest round of software updates, they've launched yet another groundbreaking tool for option traders.  While perhaps not as revolutionary as their 3D Skew feature, the new volatility comparison charts still offer some exciting possibilities.  Though there are numerous sources you can go to that offer the ability to compare historical and implied volatility for the same security, I'm not aware of any, save Livevol, who offer the ability to perform relative comparisons on the implied volatility of different securities.  While it's true you could view multiple volatility charts side-by-side or one after the after the other to make relative comparisons, Livevol has taken it a step further allowing users the ability to overlay vol charts from several different securities simultaneously.  Consider the following chart comparing the 30 day implied volatility of RIMM versus the SPY (click image to enlarge).

 [Source:  Livevol Pro]

As I see it, viewing vol charts in this manner gives us the ability to draw quicker, more meaningful conclusions in the area of correlation.   Traders can now easier tackle questions such as...
What effect do broad market volatility trends have on the volatility of individual companies?
What are the similarities or differences between the volatility of different asset classes such as stocks, bonds, and commodities?
When do we see an individual company's volatility move in tandem with the VIX, when does it move to the beat of its own drum? 


In addition to the aforementioned volatility comparison charts, other new features of note include relative price comparison and a custom scanner allowing the ability to build scans specifying your preferred price, volume, fundamental, and volatility characteristics.  When launching Livevol Pro, it was professed "to be the new standard in option trading".  Well, mission accomplished in my book.  It is quickly becoming a one stop shop for option analytics.

For related content, readers can check out:
What Will They Think of Next?
Finding Volatility
GOOG, What Volatility Bid Up?

3 comments:

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