Daily Variance in Volatility Visualizer's High Probability Volatility Scans

Daily Variance in Volatility Visualizer's High Probability Volatility Scans

Volatility Visualizer is a charting tool for Thinkorswim with advanced scanning capabilities to narrow down a subset of trades we believe have the highest probability of breaking out from their present channel. The tool is built to simplify the presentation of these names.

What is Daily Variance?

The Daily Variance is the expected move for any given day. Instead of looking at volatility monthly or weekly, use the daily variance to track the data daily.

Think of the Daily Variance as a 1-Day Vix. That’s really what it is because it extrapolates what the 1-day move is based on the current Implied Volatility reading. You can technically use the daily variance to see where today's vol is ranked against the past.

For example, if the Daily Variance is 3.5%, that might equate to a $.70 move in the underlying stock.   Over time, if that daily variance continues to go lower, that might mean those options are starting to trade too inexpensive relative to some of its peers.  When this happens, we believe these are high probability option trades.

The Daily Variance is a helpful way for traders to know how much an individual stock can be expected to move in any given day.

CCJ has a daily variance of $.92 which means the difference between the high and low on any given day should be around $.92.

When CCJ traded with a daily variance closer to $1.40, that just means the expected move for that day was $1.40 as opposed to $.92.


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