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Barclays options strategy
Last Activity 1/29/2023 10:31 AM
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Boris Lund

Posts: 59

Joined: 12/9/2021

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Subject : Barclays options strategy
Posted : 2/21/2022 2:38 PM
Post #31915

That looks very interesting.
fig.30 page 20
"Given the frothy speculative trading and short market maker positioning, selective selling single stock volatility (via delta hedged straddles) using VolScore Based approach has added significant value by screening for rich volatility names in 2020"

So as I understand it, the premium is relatively too high, driven by the implied volatility from the retail crowd. But the realized volatility is more often a lot less so there is a market in finding those premiums that are relatively too high.
A very low risk approach would be the iron condor so we have stop loss over and under our volatility window.

Here is a short writeup.

Barclays Strategy #1: The Straddle (better with the iron condor)
"Barclays determines which stocks to use this strategy on based on their VolScore metric, or the volatility spread between a stock's volatility and the volatility of the industry that that company participates in"

Barclays Strategy #2: Long Call Spreads
Barclays buys a long call, then sells an even deeper out of the money call

So with a very high volscore you use strategy #1 and with a very low volscore you use strategy #2

Beta measures a security's volatility relative to that of the broader market, hence the indicator BETA(21,"$SPX").
To make our own volscore we would need to calculate Beta versus the group it belongs to.
So looks like it would be possible to scan a group and sort on beta vs that group. Scan the technology group, sort BETA(21,"$XLK")
But we would still be missing how many of the bought option calls are from retail small orders.


[Edited by Boris Lund on 2/22/2022 8:37 AM]

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