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Gamma Optimizer | Gamma Optimizer Tutorial

Leonardo Valencia

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Gamma Optimizer Tutorial

Transcript:

Okay, so this is going to be a short tutorial on how to use the camera OPTIMIZER. And also for those of you that don’t know me. I am Leo Valencia. Your host had the Gamma Optimizer trading Room. I use this opportunity to welcome you and to thank you for your support. So for the guys for you. Guys Revenue to the Cam Optimizer. This is a very simple tool, which is also very powerful that will help you pick the best strike and expiration for an option, so the tool is really good. When you want to play a directional move, you know? Do you think something is going to go up? What, you think something is going to go down and you want to play it, but you don’t know what is the best way to play it. So for this, A small tutorial for this short tutorial? I am going to use SPX, so I put the carrot in front because it’s an index gate data and it loads the data and then this is going to be a simulation of SPX. Going down, it’s not that. I think that SPX will go down. It’s just that it’s kind of fun to simulate when something falls, so I change it to a move down and not only that I think this is gonna fall massive, we’ll massively in the sense. I mean, like a meaningful amount of points, 45 points this straight. I will stop this trade. If instead of falling SPX goes up 10 points. You know, is this is more for internal bookkeeping purposes. You know, the stupid risk number that you put. There really doesn’t affect anything in this simulation. You just used to compute the risk reward factor, But, you know, it’s more small for you, and you know, like when you design a trade, you usually have these kind of parameters, so let’s say that those are my parameters, 45 points down and I am willing to keep this trade. I’ve until SPX moves ten points against me. The duration of the trade is going to be seven days. So you know, you have to be really careful here. The duration is calendar days as the parameter calendar days because options are priced in calendar days, so given that we have Thanksgiving holiday next week and the weekend, so these seven days calendar days that are actually probably only like for trading days. So this is just something to keep an eye. It’s like when you pick the duration, and then that’s it. Let’s plot this and see what happens, so the tool shows me the best strikes and explanations and also like a graph. So so what is that table now? So the table is basically the top three options that will help me play this particular move and a nice, colorful graph down there is is is like showing me visually the return of every strike, so look at this here. So this is those of the strikes that I can pick, and every line represents different option lines, for instance. This red line represents the seven day option. This one the nine day they’re 12 You can see a mapping. It shows me where I mean. There are many more about the tool. Kind of shows you only like the first ten, so we are going to. You can explore this like, basically. The table is showing you the three peaks If you can see here If I put the mouse on the peak, you can see the strike. The return is the same information on the table. The same if I move down here if it moves. Yes, so if I moved out here, then you can see. It’s also the same entry on the table. And if I move down here, this one here like the pic. Okay, so you can see that the table basically is a nice representation of what the graph is telling me and the graph you can explore many other strikes. Now you don’t need to only explore the the ones that are on the table you can pick out. What is these and you can see? What a laser is two hundred percent return and as they stood two hundred eighty two thousand one hundred and ninety strike. So what this is telling me, is that? Okay, you want to play that kind of move? In this simulation, you should pick the 2155 put for any of those explorations and each of them will give me a slightly different results, and that’s like the easiest thing to do, however. I went to add terrain, particularly in index options. There is there. Is something else going on here? I mean, the option is good and you come, you can buy it and you will get a nice return. In fact, you will get a way better. Return that for 186 But if you really want to know what will happen in a in a in a move down of 45 points, it’s better to use a little bit more of of advanced options, you know, most of the time when in the line moves implied volatility also changes so in index options. This is a behavior that is very easy to observe when they index goes up. Implied volatility of all of the options tend to fall a little bit. And when the index moves down, the implied volatility of the options tends to go up and now with, you know, with normal moves like 10 20 points. This kind of like differences in implied volatility are meaningless. They really don’t affect much. The result of these simulations, however, 45 points is kind of like a two percent move in only seven days. It starts to have an effect on on the resource of the simulation, so in order to see what the effect is, we can go to the Advanced Options. And and then you can see a couple more things. You can see a starting strike and in a strike it those are propagated automatically. It is basically the limits of this graph. You know, 2045 around here in this corner. 2305 is ready. It is kind of like, you know the the range of the x-axi’s, the domain of the X-axis. Now we move from here to here. You can change it if you want to kind of zoom in into certain areas of the simulation, But the thing that I’m really interested right now is the volatility surface. I want to, I want to use a different activity surface. Right now we have traditional, which means is like. Ah, you know, the effects are not done much with we can switch it to a stochastic. In a stochastic volatility, Those effects of the moves are actually now modeled, mathematically in a more accurate way, so this is like the most accurate simulations you will have. It’s not active by default because it takes some time to run so the results will take a little bit to run in, particularly in something like SPX studies that has probably 7000 different options on it, but let’s do an a stochastic simulation and see if these graph changes or these values change. So we plot, it doesn’t magic and it changes drastically completely. I mean, is that total change? And the reason is because of the magnitude of the moving of 45 points is significant. And and now you can see the table is showing me 2085 which is probably is right right around here more like the little. Peaks that you can see on these curves. It’s pretty much like right here, 2008 85 so it’s showing me the best returns for 2095 2155 so now with stochastic volatility. You can see that you can play the same. Move down! Get a much better return and you can go farther out of the money. This is home so even if you don’t know a stochastic volatility, you will be OK with the results from the previous one because the resource of the traditional simulation are very conservative. This this results are a little bit more like you know, adventures. They they’re assuming EE T will go up in certain way. Sometimes the market reacts a little more coram to a drop sometimes bloody heels and go up that much. So I guess is a judgement. Call from you! If you want to like all the way here with these, or you want to stick with the one suggested by traditional well at little or just becoming a ground like probably a k-6 hundred percent return. I guess I’ll be happy with this contribution. Return so, OK, you know, and then? I can explore on the graph where the six hundred percent return is. And that’s it for now. I mean, this is the first tutorial. Hopefully you like it on and also testing all sorts of software. I have never done a tutorial, so be patient with me, guys. Thank you very much.

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