GOOG IV for June options too high?

Discussion in 'Options' started by union1411, May 14, 2005.

  1. For near the money options the IV is at 30. Seems too high to me. That's what, a move of $60 or so by end of June? Stock has been moving up/down 1 point a day for past 2 weeks.
  2. MTE


    Where did you get $60 from?

    1 Std is about $21 based the current stock price, volatility and time to expiry, and the ATM (230 stike) June straddle is trading at about $16.20. So the market expects a move that is smaller than 1 Std.
  3. I admit, I started the thread as a way to assist me as I study options.

    I think I see where I went wrong. IV is an an annual volatility. I thought at first that IV was the vol for the period remaining for the option.

    So this is the correct way, right? To get weekly vol, I divide the IV of 30 by square root of 52 weeks [7.2] which equals approx 2.75 weekly vol.

    So, 1 std dev is 2.75% x $230. So about 6.3 pts or less a week 68% of the time for GOOG. That makes sense since GOOG has been moving up/down about about 3 or 4 points a week for past 2 weeks.

    I think I'm starting to get this.
  4. MTE


    Yes, that's right.
  5. or take daily range and multiply by 16 to get annual vol. approx.