Dataset Name: orats_us_equities_option_data
Group: options
Vendor: ORATS
Asset Class: Equity
Data Update Frequency: intraday
ORATS Historical Volatility
In addition to offering traditional close-to-close realized volatility computations, we offer a second way to view historical volatility. Our proprietary historical volatilities are calculated from intraday open-high-low-close stock price market information and produce more accurate daily volatilities than traditional methods like close-to-close.
Ex-Earnings Historical Volatility
Close-to-close and ORATS historical volatilities are also presented with the day of and day after earnings taken out of the calculation. These calculations are important as they can be compared over time or when analyzing a non-earnings expiration.
Implied Volatility
The ORATS implied volatility summarization technique produces an accurate smoothed market value curve. This single line fits between the calls and puts bid-ask at a high rate. Our method of summarizing the implied volatility surface allows simplification of strike relationships to a few factors, at-the-money implied volatility readings, constant maturity readings ie 30 days, slope of the strike implied volatility skew and curvature of that skew. These factors are comparable over time and across related equities and produce an effective forecasted volatility surface. ORATS presents the implied volatility and forecasts for the first four months with standard expirations on the third Friday of the month. Seeing all standard options expirations allows for assessment of the implied volatility across assets and against monthly forecasts.
Interpolated Implied Volatility
The constant maturity implied volatility is calculated by measuring the two expirations around the day to be measured. ORATS presents the 30, 60, and 90 days interpolated implied volatility.
Interpolated Implied Volatilities At Various Deltas
ORATS presents the constant maturity implied volatilities at various delta levels in addition to at-the-money 50 delta: The 5, 25, 75 and 95 call delta IVs are also presented.
Constant Maturity Ex-Earnings Implied Volatility and Implied Earnings Move
The most important measurements are constant maturity implied volatilities, and especially with earnings effects taken out of the implied volatility. As a result of our accurate implied volatilities and sophisticated methods of term structure modeling, ORATS determines the additionally implied volatilities in the expiration months that are affected by earnings announcements, what we call the Implied Earnings Move. Implied earnings moves are taken out of the implied volatility term structure by solving for the resulting ex-earnings implied skew versus a rational implied volatility term structure model.
Earnings Moves Studies
The Implied Earnings Moves can be compared to the average absolute actual earnings moves in a stock. This simple earn move calculation is the absolute value of the last twelve percentage moves in the stock after an earnings announcement.
Implied Volatility Surface
ORATS describes the implied volatility surface as a 3-dimensional surface where the independent variables are time to expiration, and option delta and the dependent variable is implied volatility. To illustrate an implied volatility surface, we have developed a 2-dimensional graph that displays all three axes in the figure below. Summary information about this surface gives the trader a macro view of the implied volatilities for each option chain. ORATS takes a snapshot of all options on all symbols approximately 14 minutes before the close of trading. Options markets from this time are often of higher quality than at the close.
ORATS measures the surface using the following summary characteristics: at-the-money volatility, strike slope, and derivative (curvature).
The "Smile"
At-the-money volatility is the implied volatility at the 50 delta call and put, or in other words, at the straddle. Strike Slope is a measure of the amount that implied volatility changes for every increase of 10 call delta points within the intra-month skew. It measures how lopsided the 'smile' or 'smirk' is. The derivative is a measure of the rate at which the strike slope changes for every increase of 10 call delta points within the intra-month skew. It measures the curvature of the intra-month skew or 'smile.' We chose just two parameters to describe the skew to get a reasonable fit for the fewest assumptions.
Using this method of describing the skew has the additional benefit of producing accurate at-the-money volatility readings important for summarizing the term structure.
Advanced: Calculating an Implied Volatility for Each Strike
Given the at-the-money implied volatility, the slope and the derivative, an implied volatility can be calculated for each strike. First, a call delta is calculated for the strike using a standard option pricing model (not provided). Second, the slope and derivative for the expiration is calculated given the interpolated slope and derivative for that expiration. Third, the implied volatility formula is used to determine the strike implied.
Percentile Analysis
It is useful to see where the current reading of a variable is in relation to a time series of observations. The percentile takes all the observations, sorts them, and makes an assessment of where the current reading is on that list. To calculate percentile, you sort the list of numbers. Then you find the number in question from the list and take that index and divided by the length of the list. So an example of getting the current percentile of IV = 15 from the list of [8,15,12,10,6,20,25,30]. Sort the list [6,8,10,12,15,20,25,30]. Find the index number IV= 15 in the list, which is 5th index. The percentile = 5 / 8 = 62.5%
Borrow Rate
This observation is calculated by averaging the following calculation performed for each strike that is traded for a specific underlying asset: Average of the call market bid ask prices minus the call theoretical value plus the average of the put market bid ask prices minus the put theoretical value. Theoretical values are computed using the following inputs: publicly announced inputs for interest and dividends; and volatility based on the implied volatility of the average of the market bid ask prices. Higher values for Borrow indicate that the option prices are implying that any or all of the following inputs are different than what is expected: interest, dividends, and hedge price.
Forward Implied Volatility
The forward volatility is a measure of the implied volatility over a period in the future extracted from IV at the beginning of that period and the end of that period. ORATS calculates forwards using the neighboring constant maturity implied volatilities 20, 30, 60, 90 and 180 days and the 30 to 90 day period.
Flat Forward Implied Volatility
The flat forward volatility is a measure of the implied volatility over a period in the future using theoretical pricing relationships from IV at the beginning of that period and the end of that period. ORATS calculates flat forwards using the neighboring constant maturity implied volatilities 20, 30, 60, 90 and 180 days and the 30 to 90 day period.
Flat Forward Divided by Forward Implied Volatility
The flat forward volatility divided by the forward volatility can produce meaningful signals on future volatility behavior of the underlying instrument based on IV levels of the term structure. ORATS calculates flat forwards divided by forwards using on the neighboring constant maturity implied volatilities 20, 30, 60, 90 and 180 days and the 30 to 90 day period.
Ex-Earnings Forward Implied Volatility
The forward volatility is a measure of the implied ex-earnings volatility over a period in the future extracted from IV at the beginning of that period and the end of that period. ORATS calculates forwards using the neighboring constant maturity implied ex-earnings volatilities 20, 30, 60, 90 and 180 days and the 30 to 90 day period.
Ex-Earnings Flat Forward Implied Volatility
The flat forward ex-earnings volatility is a measure of the implied ex-earnings volatility over a period in the future using theoretical pricing relationships from IV at the beginning of that period and the end of that period. ORATS calculates flat forwards using the neighboring constant maturity implied ex-earnings volatilities 20, 30, 60, 90 and 180 days and the 30 to 90 day period.
Ex-Earnings Flat Forward Divided by Forward Implied Volatility
The flat forward ex-earnings volatility divided by the forward ex-earnings volatility can produce meaningful signals on future ex-earnings volatility behavior of the underlying instrument based on IV levels of the term structure. ORATS calculates flat forwards divided by forwards using on the neighboring constant maturity implied ex-earnings volatilities 20, 30, 60, 90 and 180 days and the 30 to 90 day period.