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The Intraday Volatility Smile Every Day Trader Should Know
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ticker lesson
Breakdown
0:00lesson
Intraday momentum and SPX hourly breakdown
- Intraday momentum analysis for SPX minute data
- Zero-DT traders benefit from SPX minute data
- SPX volatility changes throughout the trading day
- Volatility peaks near the end of the trading day
- Daily highs and lows occur during volatile hours
1:36lesson
Intraday volatility smile pattern
- Intraday volatility smile observed in SPX
- Volatility peaks at the start and end of the day
- U-shape pattern in SPX volatility
- Average absolute one-minute moves are small
- Volatility smile is a key pattern
3:13lesson
SPX drift and historical trends
- SPX drift is measured as positive or negative return
- Market shows slow positive drift over time
- Drift data spans 14-15 years
- Drift is strongest during 1:30 to 2:30 p.m
- Drift is minimal near the end of the day
4:47lesson
Daily high and low setting in SPX
- Daily highs and lows are set during volatile hours
- 32.4% of daily highs occur in the first hour
- 39.6% of daily lows occur in the first hour
- 22% of daily highs occur in the final 30 minutes
- Daily extremes are concentrated near the open and close
6:30lesson
Implications for neutral and directional trades
- Neutral strategies benefit from waiting for volatility
- Exit points should avoid early volatility
- Last 30 minutes challenge short put/call strategies
- Gamma increases near the end of the trade
- Non-directional trades should avoid last 30 minutes
8:17lesson
Average return to close and trade timing
- Average return to close is positive in the morning
- Average return turns negative by 2:30 p.m
- Probability of finishing higher falls below 50%
- Avoid holding trades until expiration for bullish trades
- Bearish tendencies peak around 1:30 to 2:30 p.m
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