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Joined: 4/27/2005(UTC)
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Does anyone have the formule to ODDS Probability Cone or something close? I wanted to see if I could encode it in a explorer.
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Rank: Newbie
Groups: Registered, Registered Users
Joined: 2/18/2007(UTC)
Posts: 1
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I know this post is old but if dieselpr is still out there or someone else had the same question I have an indicator formula. I haven't yet figured out how to get the cone shape or how to get it to start on a certain date and stop on a certain date.
The user inputs the days til expiration and the ATM Implied Volatility. I had to hard code the 90% probability so that input doesn't work. The indicator looks like bollinger bands but the indicator is only good for the latest price, date, and ATM Implied Volatility.
So if XYZ stock is trading at 100.00 on 2/26/07 with March's 100.00 (18 Calendar days away)option ATM Implied Volatility at 20% the upper limit of the indicator is 107.03 and the lower limit of the indicator is 93.43. I ignore all other previous values of the indicator and only rely on the end points.
I interepret the indicator this way: XYZ stock has a 90% probability of closing between 107.03 and 93.43 by March 16. I can place a credit spread above 107.03 or a credit spread below 93.43 or an Iron Condor selling calls above 107.03 and buying an even higher call then selling puts below 93.43 and buying even lower puts.
Its still a work in progress. I'm trying to build an indicator similar to the ODDS indicator. I would use the ODDS indicator but I get different upper and lower values than the ODDS. Anyway here it is:
days:= Input("Enter # of Days til Expiration: ", 1, 90, 45);
vola:= Input("Enter ATM Implied Volatility: ", .0001, 2, .5);
prob:= Input("Enter Probability: ", 75, 95, 90);
Exp(vola*(Sqrt(days/365))*1.28155)*CLOSE;
Exp(vola*(Sqrt(days/365))*-1.28155)*CLOSE
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Rank: Advanced Member
Groups: Registered, Registered Users, Subscribers, Unverified Users
Joined: 10/28/2004(UTC)
Posts: 3,111
Location: Perth, Western Australia
Was thanked: 16 time(s) in 16 post(s)
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Wink, There are a few issues here: 1. Have you tried applying the ODDS cone and then adjusting the paramters from their defaults? Have a read of the MS Users Manual for more information on plotting indicators and adjusting their parameters. 2. You might have gotten close to the edge of a major stumbling block for MS and those people who try to code in MS; there is a big difference between "days until/since an event" and "bars until/since an event". I think you should be measuring the number of bars elased since a particular calendar date and then combine your code with an algorithm that computes the number of bars until the next option expiry date. 3. If you are only interested in the end points, then you might be better off computing a running end point that plots the upper and lower expected/predicted values against the current bar. Anyway, hopefully this is some food for your thoughts. For lots of really good information and some example codes that might be really handy for your project, head over to Jose's website at www.metastocktools.com
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