Many usually reverse engineering the b&s model to obtain implied volatility. All features of an option are provided (strike, int.rates, time to expiry, underlying price, style) and then as a result they get the IV in percentage value.
I have always wondered if there were other ways to calculate implied volatility, or better still, expected volatility.
Now, Nifty spot price is 4714.00
I would like to know what ATM options are pricing. In a nutshell, market makers expectations for the near future, say march 2012.
If I sold these:
Put 4700 29Mar2012 last price is 217.00
Call 4800 29Mar2012 last price is 241.00
I would have:
Upside break even: 5258 (11,50%)
Downside break even: 4241 (10%)
Should I assume that in the coming three months the index is going to experience a 21,50% volatility at the most? How is that compared to HV or classic IV?
Also, should I assume that 100 - 21,50% = 78,50% confidence that the index is going to move neither above 5258 nor below 4241??
I'd like to hear from experts about that :clap:
Thanks :thumb:
I have always wondered if there were other ways to calculate implied volatility, or better still, expected volatility.
Now, Nifty spot price is 4714.00
I would like to know what ATM options are pricing. In a nutshell, market makers expectations for the near future, say march 2012.
If I sold these:
Put 4700 29Mar2012 last price is 217.00
Call 4800 29Mar2012 last price is 241.00
I would have:
Upside break even: 5258 (11,50%)
Downside break even: 4241 (10%)
Should I assume that in the coming three months the index is going to experience a 21,50% volatility at the most? How is that compared to HV or classic IV?
Also, should I assume that 100 - 21,50% = 78,50% confidence that the index is going to move neither above 5258 nor below 4241??
I'd like to hear from experts about that :clap:
Thanks :thumb:
