Implied volatility trading

(1) Observe NQ has pre-market downtrend. By the time market open, it will show a gap down in NQ.D
(2) When mkt open, observe VIX has a gap up
(3) Observe which heavy weighed stock of NQ has a gap down. It turns out to be GOOG, not AAPL.
(4) Observe back in TE_CL8 system, wait for NQ price to be touching -3SD, and hopefully, has a long signal from the system. Tat turns out to be 9.15am.
(5) Observe that VIX reached +3SD, NQ reached -3SD, GOOG stock price reached -3SD, GOOG ATM option $860 reached +3SD.
(6) SHORT $860 17/8/13 expiration option at $4.50. That ensures Theta (time decay), and Vega (volatility) are at its highest, thus favor us the most as option seller.
(7) Close half position when reach Option price reached $2.50, thus we have $200 profit.
(8) Close all position when GOOG reached -3SD, timing of reversal. We close @ $1.50. $300 for the remaining contracts.
Thus if we trade 2 options, we gained $500 from this trade, duration = 1 day.

This is the simplest way i can think of to trade implied volatility. We have not hedged our position with Underlying stock, neither have we utilized the realised volatility spread, and hedge along delta bands. There are much to be improved upon.





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