Have you read the article?
It's an excuse to make BS valid and give it some scientific touch. For example, my model for a human height is: heigh = magic * pi Can't...
Ackman short squizzed, buys back, Soros sells him with profit. Haha
Also, what about the fact that realized vol is usually lower than implied? There was some research about it, but can be easily calculated. Of...
You can't argue with the fact that you lost money on put and the person who sold it - made money. You would be even a bigger winner if you hadn't...
Or you can store all data in proper sql database and hope that db engine will do some caching for you.
Yes. On the other hand I just realized my calculations must be wrong (the same prices pluged into excel showed vol of 0.31
2% is a long term average. IV above is calculated for the next 7 days (You can double check calculations with prices I posted. Starting price was...
2.66 IV = 0.237 Next prices: 98.61 98.59 98.50 99.90 99.90 99.90 95.25
I'm buying straddle 7 days, underlying at 100, strike 100. Price changes are normally distributed, stdev of 2%.
Yes. I think I understand difference between straddle payoff and vol. In simple terms: if price is trending, payoff will be +, if mean reverting...
Thanks. If BS is valuing options correctly, how come buying ATM straddles makes money on average?
All doubles. When calculating vol I use days/365.0 as time. There should be no rounding problems, I showed some code in previous pages.
I thought that Black-Scholes will value options correctly even if prices are fake.
Part of bigger simulation, I wanted to make sure first step is right. I expected, that over large number of simulations net result would about 0.
It's a simulation with artificial prices with changes normally distributed. 1 simulation = 365 days. What I meant was "It makes money almost on...
It makes profit almost every year. (And that with IV slightly higher than future realized vol).
Well, it obviously depends which way market moves. In a year I can sell about 52 straddles and in total losses are almost always bigger than total...
I think I get the point. However, even when I implemented rolling to ATM every day (once a day), selling straddles still losses money in my...
That's a good point. But then, if price goes up by 1% every single day, Black-Scholes would price ATM as worthless, which is ludicrous.
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