Technically One Step Higher

Today I brought the system to five results: four for volatility and one for the cost of options.

I did not get here in a straight line. There were months of trial and error when I was literally banging my head against the wall: there was more data, but almost no precise answers. Simply saying “the price will go up” or “the price will go down” is no longer enough for me, and it is not professional.

For working with options, I also need to understand the scale of a possible move and compare it with the cost of protection.

Volatility gives me a firmer mathematical basis here than a forecast of price direction alone. So I put together four different views of future movement from what I had developed before. That includes our wave atlas: it helps compare the current picture with how similar moves from lows to highs developed in the past.

The fifth result is unusual. It shows the cost of an option alongside those estimates. That lets me ask a more precise question: not only “do I expect a move?” but “is the expected move large enough for the price currently being asked for the option?”

In other words, is the cost of protection justified?

For me, this is the next step toward an adaptive forecast. We do not make one number explain the whole market. We look at several estimates and at where they agree or disagree. Now we will test them on new days and real outcomes: where the system was useful, where it was wrong, and whether it gives us an advantage in working with options. The system will calibrate itself and, in theory, should change its view depending on the market regime. How it works in reality remains to be seen.