I have pretty much what you have Chili. So where's your confusion? Are you wondering why it doesn't look more like a smile? Personally, I...
Are you talking about S&P 500 options? That doesn't sound right. The out of the money calls normally trade at a lower IV than the at-the-moneys,...
The "smile" on indices is not much of a smile - more like a crooked smirk. Every strike price trades at a higher implied volatility than the...
Amen to that. I advocate trading like a little old lady, but for size.
LOL, very well put. Best to sell flood insurance just after a flood. People will pay a big premium for it.
In stocks, 1 option is an option on 100 shares of stock. In futures, 1 option is an option on 1 futures contract. One-to-one relationship.
Lognormal distribution does not say that. Right idea, but not that extreme (the part in italics is completely wrong of course). Please see my...
No, it isn't as likely to double as to be cut in half. It's a cumulative effect - which is why the lognormal distribution is also called a...
I'd just like to add that there's no law forcing anyone to use a lognormal distribution in option pricing. It's true that virtually every...
Not sure I understand "higher strike nominal." Could you elaborate?
There are two factors that make the ATM straddle have a positive delta. First, as Walter says, is the effect of the lognormal distribution. That...
Right you are, it's the strike that matters, not whether it's a put or a call. A put and a call at the same strike is essentially the same thing....
Walter can speak for himself - but what he meant is that the theoretical value of the OTM put is less than that of the equally out-of-the-money...
Walter - from what you've written, you're obviously a man who knows his way around options - I can easily believe you were a floor trader. So I...
Walter - keep in mind that the original question asked why- if the futures were at 1400 - the 1375 call was more expensive than the 1425 put....
The total cost of carry of the underlying is actually the cost of carry minus the dividends. At the moment the S&P500 pays about 2% in dividends,...
Yes. The cost of carry of the underlying should already be reflected in the price of the futures. Normally the futures trade at a premium to the...
With one caveat - if we're talking about options on futures, there is no cost of carry of the underlying.
In many contracts, the skew is somewhat changeable, as you say. As the underlying approaches a top, traders get excessively bullish, and they buy...
That is all true and a good explanation. There are many explanations for the skew in the S&P500, but the one you cite is the best and makes the...
Separate names with a comma.