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I am trading options, but I need to calculate the historical implied volatility in the last year. I am using Interactive Broker's TWS. Unfortunately they only calculate V30 (the implied volatility of the stock using options that will expire in 30 days). I need to calculate the implied volatility of the stock using options that will expire in 60 days, and 90 days.

The problem: Calculate the implied volatility of at least a whole year of an individual stock using options that will expire in 60 days and 90 days giving that:

  • TWS does not provide V60 or V90.
  • TWS does not provide historical pricing data for individual options for more than 3 months.

The attempted solution:

  • Use the V30 that TWS provide too come up with V60 and V90 giving the fact that usually option prices will behave like a skew (horizontal skew). However, the problem to this attempted solution is that the skew does not always have a positive slope, so I can't come up with a mathematical solution to always correctly estimate IV60 and IV90 as this can have a positive or negative slope like in the picture below.

enter image description here

Any ideas?

Luis Cruz
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1 Answers1

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Your question is either confusing or isn't about programming. This is what IB says.

The IB 30-day volatility is the at-market volatility estimated for a maturity thirty calendar days forward of the current trading day, and is based on option prices from two consecutive expiration months.

It makes no sense to me and I can't even get those ticks to arrive (generic type 24). But even if you get them, they don't seem to be useful. My guess is it's an average to estimate what the IV would be for an option expiring exactly 30 days in the future. I can't imagine the purpose for this. The data would be impossible to trade with and doesn't represent reality. Imagine an earnings report at 29 or 31 days!

If you'd like the IV about 60 or 90 days in the future call reqMktData with an option contract that expires around then and an empty generic tick list. You will get tick types 10, 11, 12, and 13 which all have an IV. That's how you build the IV surface. If you'd like to build it with a weighted average to estimate 60 days, it's possible.

This is python but should be self explanatory

tickerId = 1
optCont = Contract()
optCont.m_localSymbol = "AAPL  170120C00130000"
optCont.m_exchange = "SMART"
optCont.m_currency = "USD"
optCont.m_secType = "OPT"
tws.reqMktData(tickerId, optCont, "", False)

Then I get data like

<tickOptionComputation tickerId=1, field=10, impliedVol=0.20363398519176756, delta=0.0186015418248492, optPrice=0.03999999910593033, pvDividend=0.0, gamma=0.007611155331932943, vega=0.012855970569816431, theta=-0.005936076573849303, undPrice=116.735001>

If there's something I'm missing about options, you should ask this at https://quant.stackexchange.com/

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brian
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