Using Volatility

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Using the Volatility Charts

The Volatility Chart allows users to view up to ten volatility charts, of either historical or implied volatility type, together with a price chart of the underlying asset.

This makes visual comparison easy, and the table beneath the charts gives a breakdown of the volatility data affording other means of analysis.

Volatility Chart Viewing Tools

The Volatility Chart's function bar contains a number of tools to aid users in analyzing the Volatility chart and price chart.

volaltychart_functionbar.gif

View Control

The data in the Volatility Chart is recalculated and re-plotted each time the data is refreshed.

While there is no way to "save" the contents of a volatility chart, the manner in which it is calculated and displayed can be saved and re-applied in the future. Your SOFTWARE uses its Views function to accomplish this.

Different Views can be created and saved. Each view can then be applied using the View Selector on the function bar.

For Volatility Charts the View is composed of the different Volatility Charts, historical or implied, and the different parameters used to calculate each.

When a new view is applied using the View Selector, Your SOFTWARE replaces the existing volatility charts with those calculated using the new View's parameters and settings.

Create new View

To create a new view, select Add View from the function bar's Action menu.

You will be prompted to give the new view a name. Enter a new name and click OK.

The new name will appear in the View Selector, and the Volatility Chart section will be unpopulated.

Click the Configure View... command on the function bar's Action menu to open the Volatility Plots dialog box.

This dialog box contains all the tools needed to create up to 10 historical or implied volatility plots using a variety of data and having a number of different display settings.

For more information on using this dialog, go to the Volatility Charts - Parameters and Appearance topic.

Apply Different View

To apply a different view, select the new view from the View Selector drop-down menu.

The menu list can be managed by using the Action menu's Delete View command to remove unwanted views.

Edit Current View

Edit the display of any open view by selecting the Action menu's Configure View... command to open the Volatility Plots dialog box, see above.

Crosshairs Tool

Select the function bar's Crosshairs icon butn_xhairs.gif in the to activate the  crosshairs pointer.

Move the pointer over any spot on either the Volatility Chart or the Price Chart and details of the coordinates will be displayed in the price and date axis, as well as in the Floating Data Window, see next.

Crosshairs Settings

There are a number of display settings for the crosshairs tool. Right mouse click anywhere on either chart to open the chart pop-up menu. Click its second command, Crosshairs Properties, to open the Configure Crosshairs dialog box.

For more details on the Crosshairs tool, as well as its display options, go to the Crosshairs topic.

Floating Data Window

volaltychart_floatdatawin.gifThe Floating Data Windows displays all the data for all the charts currently displayed in either the Volatility Chart or the Price Chart.

The tool can be used with either the normal cursor, or crosshairs tool. In both cases, the data for the date passed over by the cursor will be displayed in the floating data window. The current date that the cursor is on is displayed in the Date field, the first data field in the floating window.

Underlying Asset Data

Price and Volume data for the underlying asset appears in the top portion of the data window.

The underlying asset's data will be displayed in the Data window even when the Chart Price Data is not displayed on either chart.

Volatility Levels

The Historical Volatility and Implied Volatility levels displayed in the Data window are the same as those defined and set to be displayed on the chart in the Volatility Plots dialog box.

Only data displayed as a chart will be included. Other volatility levels may be included in the Volatility Table, see below, but will not be included in the Data window unless they are set to be displayed in the chart.

For more information on these display controls, go to the Volatility Charts - Parameters and Appearance topic.

Volatility Table

The combination of a security's Volatility Chart and Volatility Table provides a powerful trading analysis tool.

While the volatility chart enables you to view the movement of volatility over a period of time, the volatility table allows you to compare the historical volatility, using the latest price data.

To understand how this can benefit your analysis, we need to look at the contents of the table in more detail.

Volatility Types

The details of up to ten volatility calculations can be included in the table.

The number and type of volatility calculations to be included is set for each individual View [see above] in its Volatility Plots dialog box.

Each volatility calculation will form its own row in the table.

Data Display

Each Volatility type's row in the table includes following columns of information:

Chart

The settings in each View's Volatility Plots dialog box determine whether each Volatility calculation is plotted or not.

Users can toggle the charts on or off by checking or un-checking the check-boxes.

The default can only be changed in the each Volatility Plots dialog box

Volatility Type and Periods

The Chart column is made up of check boxes that enable you to toggle the different volatility types on or off.

This will add or remove the volatility types from the volatility chart.

There are eight Volatility types, and different periods can be set for each.

The types are chosen, and the periods set, for each volatility calculation in the each Volatility Plots dialog box.

Go to the Volatility Type table for a comparison of the different types available.

Value

The Value column shows the latest value for each of the volatility types.

Percentile

The next column shows the Percentile for the volatility type.

This is calculated using the highest and lowest volatility value for the period specified in the Decile Months in the lower right corner of the screen. As a default, a six-month period is used, however this can be adjusted in line with your preferred trading strategy.

The total range of the period is divided into 100 equal portions and the current value for each volatility type is then placed into the relevant percentile band.

Decile

The Decile column simply takes the percentile value and places it into a decile, which includes ten percentiles.

The importance of the decile calculation is shown in the subsequent columns, which show the value for each decile for that volatility type. The dark blue square indicates which decile the current volatility value is found in.

volaltychart_voltablwords.gif

This feature allows for clear comparison of the different volatility types. For example, in the screenshot shown above, the historical volatility of the last 10 days is in the fourth decile, while the historical volatility of 100 days is in the first decile. This suggests that the recent volatility is higher than the average volatility over a longer period of time.

Change Decile

Enter a new Decile amount in the Decile Months text box.

Move the number up or down to see the effect on the position of the blue boxes in the table.

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