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Brian Johnson has written great book on Exploiting Earnings Volatility. He explains how to use his novel approach to 1) solve for the expected level of earnings volatility implicitly priced in an option matrix, 2) calculate historical levels of realized and implied earnings volatility, 3) develop strategies to exploit divergences between the two, and 4) calculate expected future levels of implied volatility before and after earnings announcements and develop trade to gain volatility to your advantage.

He has provided 2 excel sheets. Excel solver has few limitation, may not always come to optimal solution. I was wondering if anyone has converted this to Python ? Any pointers ?

Thanks

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  • $\begingroup$ Where are there excel sheets available? $\endgroup$ Sep 30 '20 at 17:09
  • $\begingroup$ @DavidDuarte: It is hidden in the last section Spreadsheet Tools of the appendix. If you find the description of the option model the author uses please let me know. $\endgroup$
    – Hans
    Sep 30 '20 at 17:27
  • $\begingroup$ What option model is he using? Is there a description? Can you see the code? Otherwise, how would you convert the solver to Python? $\endgroup$
    – Hans
    Sep 30 '20 at 19:00
  • $\begingroup$ Unless there are details you're not sharing (eg, local v. global minima) it's highly likely that any optimization routine in Python would arrive at the same suboptimal solution. The issue is likely more a weakness of optimization not Excel. $\endgroup$
    – Chris
    Sep 30 '20 at 23:31
  • $\begingroup$ @Hans Thank for your reply. Author uses his own formulae (I assume they are slighlty modifed from Black Scholes model but pretty similar). He has 2 youtube video where he explain his model youtube.com/watch?v=esDRVtnZz08&ab_channel=TraderEdge youtube.com/watch?v=08vWKmNhXN8&ab_channel=TraderEdge I have file with VBA code. Can I upload it here ? I didn't see option to upload $\endgroup$ Oct 3 '20 at 4:42

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