# Volatility lab

Volatility lab tab is used for graphic analysis before starting to trade options:

![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2Fd00709b10c94614b3c5ee4400d7e342eabf498ef.png?generation=1628062505538154\&alt=media)

This tab allows plotting the "Volatility lab" which is considered as a totality of IV values for a specific option contract. Also, it is possible to plot "Volatility lab" graph according to actual market data and Vanna-Volga implied volatilities model.

See the blue chart for "Volatility lab" plotted according to actual market data and the red one for Vanna-Volga implied volatilities model on the chart below:

![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2Fa2c1d150774274b976922e801605b47aceebe462.png?generation=1628062505598293\&alt=media)

## **Vanna-Volga implied volatilies model calculation algorithm**

This model is plotted for selected option series and gets the following elemental parameters:

* Days to expire of selected option series – Days/365;
* Underlier price – can be Forward or Current last price, is calculated with taking into account interest rates.

If Forward price is selected in the settings, then Forward price is calculated this way:

Forward price = Current last price \* e^(M\*Days/365), where

M = Domestick rate/100 - Foreign rate/100;

* ATM strike – is a strike, value of which is the closest to a Current last price value;
* ATM IV – an arithmetic mean of ATM Call and Put strikes IV;
* D Call strike – is a Call strike, Delta absolute value of which is the closest to a Delta value in the settings![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2Fde9a4d051c2c9e6c5a4e9e5b9b2416bc862f4ca4.png?generation=1628062500277221\&alt=media); 
* D Call IV - D Call strike IV;
* D Put strike - is a Put strike, Delta absolute value of which is the closest to a Delta value in the settings;
* D Put IV - D Put strike IV;
* Strikes array of selected option series.

  These parameters are used in array’s model values IV calculation for selected option series.

  The calculated series are reflected on the Volatility lab chart.

**Chart settings menu**

In the Chart settings menu you can choose the Side, Visible series and Volatility models to be displayed on the chart:

![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2Fad5c1a69e44490985355f96be2d2b173f9d65131.png?generation=1628062506239650\&alt=media)

In order to hide the Chart settings menu, press the button![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F698e6a2ead0a177ce5f01cd52f244a3a46013efc.png?generation=1628062505562963\&alt=media), this will result into the chart’s maximization.

* The drop-down list in the Side section allows selecting an option side (strikes) on which the "Volatility lab" will be plotted. Available strikes are Calls, Puts, Calls\&Puts:

![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2Fb8ccbe6164fcb0f7ff2b0dfaf3549b637aa37ed6.png?generation=1628062505201283\&alt=media)

* The section Visible series allows selecting series for "Volatility lab". Mark series as checked to get one or more "Volatility lab" graphs plotted on the chart:

![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F7041928fe6bf3a5fbba227a80777dfa7a441799a.png?generation=1628062505363357\&alt=media)

* Pressing![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F01e85d25754d31a52ea550668ec89240e6cf4b2c.png?generation=1628062505028316\&alt=media)

  allows to define graph’s thickness (from 1 to 10 px), and pressing![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F9fd2bea78d4ddde98ce7cefd6680222b8306850a.png?generation=1628062505413701\&alt=media)calls the dialog window for graph’s color selection:

![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F340f4088e4d195d7e468c2a62c76b0324a42b9a2.png?generation=1628062504923485\&alt=media)

Marking the option![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F202708dc83432aebb3edd324f73c0fa39f391072.png?generation=1628062505585217\&alt=media)as checked in the Volatility models section allows to plot Vanna-Volga implied volatilities model.

This graph can also get its individual parameters via thickness and color selection (![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F01e85d25754d31a52ea550668ec89240e6cf4b2c.png?generation=1628062505028316\&alt=media),![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F24264421e97f03144494c8c63488de8f9668c2b4.png?generation=1628062505421416\&alt=media)).

* The drop-down list of the Option series section allows selecting an appropriate series for Vanna-Volga implied volatilities model:![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F7bc9cb924fcb0d7b01649a9e6a2f9bab6bb604a6.png?generation=1628062505172440\&alt=media).

Be attentive to choose the same series for Vanna-Volga implied volatilities model as for “Volatility lab” graph plotted according to actual market data.

## Chart scaling

The chart view can be manipulated with the buttons![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F148565eaf1a46e5baa9f96f9450c8eb22abc7142.png?generation=1628062505694830\&alt=media), located in the buttom-right corner of the chart field:

* Pressing the button![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F6596c3c7f107fe14f6e9e6a53a834c0ee4985c58.png?generation=1628062505557501\&alt=media)allows to zoom out of any random area of the chart;
* Pressing the button![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2Fd04efa264a3d052c130c0197b282124adddb14d1.png?generation=1628062505001297\&alt=media)allows to zoom in to any random area of the chart;
* Pressing the button![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F9b203839dc4dbc29afaf981fad3d92095a7be9d3.png?generation=1628062505664554\&alt=media)

  allows to enable selecting any area of the chart for zooming in. Pressing this button again disables this option.

The chart view can be also manipulated with some additional options:

* Hovering the cursor over a chart’s dot + mouse wheel scrolling - allows zooming in to and zooming out of a chosen dot![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2Ff727eadc4f8013f23a11f5edb7a3d2a1d9fa2c21.png?generation=1628062505122437\&alt=media)of any chart;
* Clicking + holding + moving the cursor on a random area of the coordinate plane![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2Fe547c72c1f22ad24a00f12bab3e5395df86afc50.png?generation=1628062505832871\&alt=media)- allows to focus the chart view on this area of the coordinate plane;
* Clicking + moving the cursor on any area on the X or Y axis - allows to move on the left/right (X) or up/down (Y) on this area on the X or Y axis;
* Clicking + scrolling on any area on the X or Y axis - allows to zoom in to and zoom out of this area:

![](https://1123742694-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MgF394Y8wbK0k-qZW4n%2Fsync%2F7d52135e4e9f5c9688a01c0001576f1110e58528.jpg?generation=1628062505900191\&alt=media)