Sir, in one of your tweets you say, that you use momentum, trend and volatility to score every ticker in the SP500. How are you using volatility in this context?
Volatility can drive position sizing. Rising vol = position size reductions. With that in mind volatility can be a leading indicator of more volatility. Its does not have as high a weight as the other two though, as we can see in the SPX currently price is rising and vix is rising. It is not as clear cut and so has a smaller impact on the calculation.
Thank You. So more like normalizing the momo/trend signal with std dev I guess? In case of index we have VIX, for all sp500 stocks it would be more difficult to get IV from all the option chains. The other option i was thinking was calculating some volatility proxy from OHLC. But I would go with the first option after reading what you wrote :-) You don't have to answer if it's too much.
Sir, in one of your tweets you say, that you use momentum, trend and volatility to score every ticker in the SP500. How are you using volatility in this context?
Volatility can drive position sizing. Rising vol = position size reductions. With that in mind volatility can be a leading indicator of more volatility. Its does not have as high a weight as the other two though, as we can see in the SPX currently price is rising and vix is rising. It is not as clear cut and so has a smaller impact on the calculation.
Thank You. So more like normalizing the momo/trend signal with std dev I guess? In case of index we have VIX, for all sp500 stocks it would be more difficult to get IV from all the option chains. The other option i was thinking was calculating some volatility proxy from OHLC. But I would go with the first option after reading what you wrote :-) You don't have to answer if it's too much.