Options Trading Strategies Forecasts and Risk Modeling

This article was written by:

dr roitmanDr. Lipa Roitman, Co-Founder & CTO at I Know First..

Michael Shpits, Financial Analyst at I Know First.


  • Introduction to risk modeling and forecasting options with machine learning.
  • New Implied Volatility package from I Know First Predictive Algorithm.
  • Options trading strategies for optimal returns and risk mitigation.
  • Algorithmic performance analysis of Implied Volatility package.

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Algorithmic Trading: Trade Professionally With Implied Volatility

Chloe PengThe article was written by Chloe Peng, Analyst at I Know First., Master of Science of Finance candidate at Brandeis University.


  • Implied volatility reflects the forecasted likelihood of certain price movements and thus can be used to evaluate option prices.
  • Buy when options are traded at lower implied volatility and sell when they are traded at higher implied volatility.
  • I know first’s volatility forecast package helps professional option traders to better decide on their positions.

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I Know First Evaluation Report For Options Universe

Executive Summary

In this forecast evaluation report, we will examine the performance of the forecasts generated by the I Know First AI Algorithm for assets from the short term signals Options universe provided as part of the Options Package, which is sent to our customers on a daily basis. Our analysis covers the time period from 1 January 2019 to 14 July 2019. We will start with an introduction to our asset picking and bench marking methods and then apply it to the Short Term Signals Options universe covered by us in the Options Package. We will then compare returns based on our algorithm with the benchmark performance over the same period. Below, we present our key takeaways from applying signal and volatility filters.

Options - Short Term Signals Highlights:

  • Top 5 signals had better returns in all time horizons than the Benchmark Index. The best return came from the forecast for a 14-day time horizon which produced a return of 2.18% which outperformed the benchmark by 59%.
  • Top 10 signals had better returns in all time horizons than the Benchmark Index. The best return came from the forecast for a 14-day time horizon which produced a return of 1.58% which outperformed the benchmark by 15%.

Winning Stock Forecast: Shorting ALGN Stock Returns 26.44% in 14 Days

Winning Stock Forecast: Shorting ALGN Stock Returns 26.44% in 14 Days

Align Technology Inc (ALGN)

Align Technology is a global medical device company with industry-leading innovative products such as Invisalign clear aligners, iTero Intraoral scanners, and OrthoCAD digital services that help dental professionals achieve the clinical results they expect and deliver effective, cutting-edge dental options to their patients.

Source: aligntech.com

ALGN saw a drop of -26.44% in its stock over the past 14 days. Align Technology is a manufacturer of 3D digital scanners and clear aligners used in orthodontics. The Company offers a system that corrects the misalignment using a series of clear and removable appliances that move teeth to a desired final position. However, many of the company’s patents have expired, as of December 17, and it is now facing fierce competition in the market. Although they are still the market leaders this has not provided investors with the confidence that ALGN is a company with a long-term product.

On October 24, 2018, Align and management announced the Company’s 3Q 2018 earnings. They reported clear-aligner sales of $427.1 million, up 25% over the prior-year period but a sequential decline of 1.4%. This drop stemmed primarily from lower average selling prices (“ASPs”) in the U.S. and internationally. Align and management blamed the lower ASPs in part on promotional discounts. This news drove the price of Align shares down as much as $87.71, or about 30%, during intraday trading on October 25, 2018. “We’re focused on investors’ losses and on the extent to which management’s statements concerning competition, sales, and promotions were misleading,” said Hagens Berman partner Reed Kathrein LLP, the Law firm representing ALGN.

This chart below shows the algorithmic forecast made on these top ten long and short options and the results of the forecast. As seen ALGN was included in the top ten short options.

Current I Know First subscribers received this bearish forecast  for  ALGN on October 12th

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 Algorithmic traders utilise these daily forecasts by the I Know First market prediction system as a tool to enhance portfolio performance, verify their own analysis and act on market opportunities faster.

How to interpret this diagram

Please note-for trading decisions use the most recent forecast.


Align Technology, Inc. (ALGN) incorporated on April 3, 1997, designs, manufactures and markets a system of clear aligner therapy, intra-oral scanners and computer-aided design/computer-aided manufacturing (CAD/CAM) digital services used in dentistry, orthodontics and dental records storage. The Company operates through two segments: Clear Aligner segment and Scanner and Services (Scanner) segment. The Clear Aligner segment consists of its Invisalign System, which includes Invisalign Full, Teen and Assist (Comprehensive Products), Express/Lite (Non-Comprehensive Products) and Vivera Retainers, along with its training and ancillary products for treating malocclusion (Non-Case). The Scanner segment consists of intra-oral scanning systems and other services available with the intra-oral scanners that provide digital alternatives to the traditional cast models. The Scanner segment includes its iTero scanner and OrthoCAD services. iTero scanner is used by dental professionals, and labs and services for restorative and orthodontic digital procedures, as well as Invisalign digital impression submission



Top Stock Research Based on AI: Up to 28.71% Return in 1 Month

Package Name: Options
Forecast Length:  1 Month (10/18/2015 – 11/18/2015)
I Know First Average: 8.81% (Call) 13.35% (Put)

See The Full Forecast

Top stock research

New: Algorithmic Options Forecast

Package Name: Options
Forecast Length: 7 Days (8/5/2015 - 8/12/2015)
I Know First Average: 4.59% (Call)

options 7dy 08052015 (1)