options-pricing

I've been trying to learn options math and am getting hung up on a basic misunderstanding. From what I have gathered, to get a single day volatility from annualized volatility, you would do something like this - var dailyVol = impliedVol / sqrt(1.0 / 365); My assumption would then be that if I want to find an "x sigma" daily move to the upside or downside, I would do the following - var newPrice …

EX. does a May 19th 50d call move with respect to the May futures contract? If so would going long 2 50d calls and shorting the underlying future neutralise the delta?

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 …

What are options in simple terms? The options trading industry is a vast one, especially in the United States. A good options trading definition is one that allows you to buy or sell a financial security at a predetermined period in time at a certain price. It gives you a right but not an obligation […] The post How to Master Unusual Options Activity in Day Trading appeared first on Real Trading .

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…