Charting and Studies User Guide - CQG.com

Page 274
Using Olympic Rules to Filter Series
After the implied volatilities are calculated for the series still in the running, these series are
arranged in order from highest volatility to lowest volatility and a fixed percentage (based on
the commodity and number of strikes) of series are eliminated from the top and the bottom to
arrive at the series that will be considered in the final implied volatility number.
How Implied Volatility is Calculated
Once the series for the calculation have been determined, CQG calculates the implied volatility
using the following method:
Option price ticks are collected for the selected series. However ticks more than 720 minutes
old are excluded:
The series are sorted by month.
The implied volatility vs. the days till expiration is plotted for the selected series within each
month.
A regression line is fitted to the points for each month and the implied volatility for the optimal
days till expiration (a constant value, assigned separately to each commodity) is taken from the
regression line
Note: The optimal days to expiration is derived from the Time Value curve. It represents the
number of days just before the time value curve attains its steepest slope, that is, just before
the rate of time decay is greatest.
Calculating Settlement Implied Volatility
To calculate settlement volatility, CQG stops collecting regular volatility ticks when the first
settlement tick passes. CQG collects only settlement ticks for the next 20 minutes. Implied
Volatilities are grouped by call and put. A linear regression line is plotted for each group. The
value of the regression line at the optimal days to expiration are the call and put volatilities for
the commodity.
Implied Volatility Constant Parameters Per Commodity
Subject to change
Symbol MinDE MaxDE ODR SR MinTicks Orpct
C 15 90 42 29 20 20
CL 4 90 42 1.4 10 20
DC 20 90 42 139 30 20
DM 15 90 42 0.02 20 20
EU 15 95 42 0.04 10 20
ED 30 280 80 0.8 30 20
Basic Studies