Originally published at flashalpha.com . If you are comparing these two, you are probably not choosing between them. Most desks that run FlashAlpha also have Bloomberg in the building. The useful question is narrower: can the terminal you already pay for feed your systematic options research? Usually it cannot, and the reason is quotas rather than quality. Full disclosure: I built FlashAlpha. Blo…
According to my understanding of the discussion in page 259 of “Options as a Strategic Investment 4/E” by Lawrence McMillan, a deep in-the-money put has less time value than a deep in-the-money call of equal moneyness. I would like to prove or verify this statement using the Black–Scholes framework (assuming no dividends), or any rigorous method. Could someone provide guidance or hints on how to …
An American option can be exercised by its holder at any time he wishes, not just at the expiration date. Textbooks tell you that pricing it in the context of the binomial model is a [...]
In this post, we will discuss on modeling option pricing using Black Scholes Option Pricing model and plotting the same for a combination of various options. If you are new to options trading then you can check the options trading basics guide to build your conceptual foundation before working with this Excel model. If you are new to options trading then you can check the options trading for dumm…
I was drawing some graphs for the plain vanilla european options. Here is one of the graphs I got:
EUROPEAN CALL
K=$50, T = 1 year, r=5%
OTM: S(0)=$40
ATM: S(0)=$50
ITM: S(0)=$60
The question is why ATM option has value when volatility sigma=0 ? I mean what is the financial interpretation of this fact? However, similar graph for the ATM European Put starts from 0.
EUROPEAN PUT
S(0)=$50, K=$50, T=…
AS THE 2006 TRADING YEAR draws to a close, many traders combing through the market are increasingly encountering puts and calls with implied volatility levels that may seem unusually attractive.
But investors are advised to be cautious as they navigate the year-end market because December's well-priced options may prove to be anything but in January.
Market makers routinely lower volatility ahead…
