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Why do calls and puts have different implied volatilities?
A
Varied interest rate assumptions
B
Dividend risk
C
Liquidity concerns
D
All of the above
Which of the following is NOT a theoretical edge that ORATS calculates?
A
Distribution edge (D%)
B
Volatility edge (V%)
C
Forecast edge (F%)
D
Smoothed edge (S%)
Skew describes implied volatility for ________ in a single expiration, while term structure describes implied volatility for ________ across all expirations.
A
all strikes, a single strike
B
a single strike, all strikes
C
all strikes, all strikes
D
a single strike, a single strike
What does SMV stand for?
A
Smoothing Market Volatility
B
Smoothing Market Vega
C
Smoothed Market Values
D
Smoothed Market Volatilities
Which of the following is a common pitfall traders experience when backtesting?
A
Overfitting
B
Path dependency
C
Unrealistic prices
D
All of the above
According to ORATS, when is the closest you can get to the market close (4pm EST) without experiencing deterioration in the quality of the options prices?
A
1 minute before
B
7 minutes before
C
14 minutes before
D
28 minutes before
What term refers to the volatility for all options across all strikes and all expirations for a single symbol?
A
Term structure
B
IV skew
C
Contango
D
Volatility surface
Which of the following is NOT an assumption of the original Black-Scholes model?
A
The movement of the underlying stock is random and normally distributed
B
The option can be exercised at any time
C
The volatility of the underlying stock is known and constant
D
The risk-free rate is known and constant
What does slope measure?
A
The steepness of the term structure
B
The curvature of the term structure
C
The steepness of the skew
D
The curvature of the skew
What term does ORATS use to describe the tendency for implied volatility to increase heading into earnings?
A
Earnings effect
B
Implied earnings move
C
Earnings drift
D
Vega spike
ORATS interpolates IVs across different deltas to simplify the term structure. Which deltas do ORATS present?
A
10, 25, 50, 75, 90
B
25, 50, 75
C
5, 25, 50, 75, 95
D
20, 40, 60, 80
What is the significance of the _C tickers in ORATS?
A
They represent the average of all calls for a given expiration
B
They represent the slope of the term structure
C
They represent correlations between IV and stock price
D
They represent component weighted averages of ETFs
Why is it important to calculate the earnings effect?
A
To determine the implied earnings move
B
To compare IV across different symbols and history
C
To calculate the residual rate based on put-call parity
D
The earnings effect is not important
Backtesting is part of which pillar of the ORATS methodology?
A
Research
B
Implementation
C
Risk
D
Review
Notional returns are used in the backtester to help standardize and normalize performance across all different types of strategies and symbols.
A
True
B
False
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