VOLATILITY STRATEGIES

Estrategias de Volatilidad

Modelos GARCH + HAR con datos reales de FMP. Walk-forward expanding, zero look-ahead bias. Estimadores Yang-Zhang, Parkinson y Rogers-Satchell.

Plan availability: Volatility models require Plus or higher. Volatility Radar and Asymmetric Risk are included in Plus. Market Regime: 1 ticker on Plus, unlimited on Pro/Advisor. VRP Scanner is included in all paid plans.

How far can it move tomorrow · HAR Model

What is the Volatility Radar and when to use it?
This model (HAR — Heterogeneous AutoRegression) predicts tomorrow’s volatility using today’s realized volatility, last week’s, and last month’s. The intuition is simple: volatility has memory — turbulent periods tend to remain turbulent.

The Yang-Zhang estimator (default) is more accurate than using just the close because it incorporates intraday moves: open, high, low, and close. Parkinson and Rogers-Satchell are valid alternatives if you only have OHLC data.

Use it to: know if tomorrow is a high-uncertainty day before taking a position. A Forecast/Realized ratio > 1.2 indicates the model expects volatility expansion.
What do the C and J components mean?
C (continuous) is the normal, persistent volatility of the asset. J (jumps) captures sharp moves exceeding 3 standard deviations — earnings, macro news, shocks. A high J indicates that recent volatility comes from a one-off event, not a structural trend.
Why the ±1σ range instead of the exact price?
No model predicts tomorrow’s exact price. What it can estimate with statistical rigor is the probable range. The ±1σ covers 68% of expected scenarios. The ±2σ covers 95%. If the price closes outside ±2σ, something unexpected has occurred.
How often should I recalculate?
The model re-trains with data up to T-1 every time you click Calculate. In normal periods, a daily or weekly review is sufficient. Always recalculate after a relevant volatility event.

Conditional VaR/CVaR with downside asymmetry · GJR-GARCH

How much can I lose? The risk that standard models ignore
The standard model assumes that market ups and downs have the same impact on future volatility. GJR-GARCH corrects that error: bad news generates significantly larger volatility spikes than good news of the same size.

The γ (gamma) coefficient measures exactly that asymmetry. A γ > 0.1 is significant: it means the market reacts with more fear to drops than with euphoria to rallies — the so-called ‘leverage effect’.

Use it to: calibrate your real stop-loss before entering a position. The 95% VaR tells you the maximum expected loss on the 1 bad day out of 20. The CVaR tells you how much you lose on average on those bad days.
What’s the difference between VaR and CVaR?
The 95% VaR (Value at Risk) is a threshold: ‘95% of days I won’t lose more than X.’ The CVaR (Expected Shortfall) goes further: ‘on the 5% of days I exceed that threshold, I lose on average Y.’ CVaR is always worse than VaR — it’s the expected loss in the worst-case scenario, not just the edge of the scenario.
Why use a t-Student distribution instead of normal?
Market returns have fatter tails than a Gaussian bell — extreme events happen more often than the normal distribution predicts. The t-Student captures that excess kurtosis. If the normal model says something is ‘impossible,’ the t model says it’s ‘unlikely but possible.’
How do I use the Capital (EUR) field?
Enter your actual position size. The model translates the percentage VaR into a concrete monetary loss. If you have €10,000 in SPY and the daily 99% VaR is 2.1%, you’re risking €210 on the worst probable day out of 100.

Variance Risk Premium · Implied vs Realized Volatility

Are options cheap or expensive? The VRP tells you
The Variance Risk Premium (VRP) is the difference between implied volatility in options (what the market expects) and realized volatility (what actually happened). Historically, options tend to be more expensive than fair — investors pay a premium for protection.

A positive VRP means options are overpriced relative to historical volatility → vol-selling strategies (sell puts, condors, iron flies). A negative or near-zero VRP is unusual and signals that protection is cheap → time to buy hedges.

Use it to: identify when the market is overpaying for options and when hedging is undervalued.
What VRP level is ‘significant’?
VRP varies by asset and regime. As a reference, for indices like SPY the historical average VRP is 3-5 annualized percentage points. A VRP > 8% is elevated — options are very expensive. A VRP < 1% is low — either the market expects an imminent event or protection is cheap.
Do I need to trade options to use the VRP Scanner?
No. The VRP is also useful without options: a very positive VRP indicates the market expects less volatility than it perceives — a sign that sentiment is calm despite recent moves. Useful for calibrating your exposure level in equities even if you don’t use derivatives.
Why does the scanner include multiple tickers at once?
The real opportunity lies in cross-comparison. If one sector’s VRP is at historical lows while the index VRP remains high, there’s a divergence that may indicate rotation or decorrelation — a signal of interest for relative strategies.

VRP Opportunities

Activos donde la Volatilidad Implícita está sobrevalorada respecto a la predicción HAR-YZ. Actualizado diariamente.

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