Ambiguity - Market Analysis on Jan 18th, 2018

I know some folks here are interesting on coding their own Ambiguity and Probability of Negative returns heuristics (which is an step towards coding their own DLA's :). As you can imagine my implementation of those concepts is secret sauce and won't see the light of the day anytime ever (trade secrets). However the ideas behind them are public and available to any of you that want to pursue them.

The Ambiguity heuristic in particular is the brainchild of Menachem Brenner, which is one of the fathers of VIX (the same VIX we use all the time). The reference paper that I used for my implementation is this one:

It is not a light reading to say the least but contains enough information for those of you interested in creating your own implementations. So that is a good starting point. Just a heads up the paper contains a few minor methodological oddities that I removed when implementing my own heuristics and one can feel that the paper is too sparse on details but believe me everything needed to compute Ambiguity and Probability of negative returns is there.

Leo Valencia hosts the Gamma Optimizer options service at