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Total Posts: 3
Joined: Sep 2019
 
Posted: 2019-09-22 22:37
Hello, I am working through "Volatility Trading" and I am currently making volatility cones for the S&P. I understand that that cones are merely one tool to be used and that they are not a golden source of trade ideas, but to me they sound logical and useful for decision making, among other things.

One thing I read in the book is that if you're using overlapping data, you need to make an adjustment, but it is unclear to me exactly what gets adjusted. When I am filling in columns for say 7 day realized vol and 30 day realized vol, the 30 day will include multiple 7 day periods. When I checked the spread sheet that came with the book, my formulas matched the authors (no adjustments made), so I must be doing it right. Does anyone know what I am talking about and know if/when I need to adjust anything?

My second question is, what is a good time span to include for day to day trade decision making? I am arbitrarily picking two years but perhaps its more wise to look back 5 years, 10 years, or even use the full history of the S&P. Although regimes and market dynamics have fundamentally shifted multiple times so looking back to inception is probably not a smart idea.
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