I have the problem with Options on the market that i trade. I suspect that the parameter as volatility is not correct for some options...For example i can give to see you a chart of volatility that i watch today..This parametr i get from my trading programm. In yellow circle you see a volatility of options that experetion would be on next week.And in green circle options that experation would be In two months...The jump of volatility that be at 11 a.m. in closer option don't in far options...And this situation i watch everyday ..I need to say that the my market is not liquid.. How i can to figure out the implied volatility by myself? Does i can figure out the volatility of option with closer experation from the volatility of far experation???? Thank you..... P.S Does it really need for trading ?(the knowledge method of calculation the IV..And The EXCHANGE don't told how it do this)
Plug in the market price of an option into an option pricing model to get the IV for that particular option.
it's not mean to be funny. Get yourself "options as a strategic investment" by McMillan and "option market making" by Baird to read up a bit on the subject. You should be able to find an option model to calculate vol if you google.
in "options as a strategic investment" by McMillan i find simple method that use the volatility of the options with more far expiretion..Is this method correct for my case? But i want to hear from traders that method you use to calculate a IV value
The trading platform I use has a built-in pricing model, which calculates the IV for all options. if you want to calculate the IV yourself you WILL need an option pricing model! I'm not suggesting you calculate it by hand using a calculator, a pen and a piece of paper. You can build a pricing model in excel and then feed the data into the spreadsheet from whatever source you use...
the implied volatility is only a parameter that you use in BL-SH formula... you must know the value of IV in the same way like you know the price of future or stock. This parameter has built in too in my trading platform...But you can see the 'method' of calculating the IV...It mean that the value that we get from our brokers and exchange not always true value.. There are many errors i find in CBOE too... And i want to calculate all value by myself if i think that they are not correct for me... from Russia with Love...
it's like MTE says: build a model in excel, put your data in and your vol should come out. If you think the options are mispriced you should easily make some money. However remember: garbage in, garbage out ... BTW: buy "option market making" by Baird to know how to make some money, also get "option volatility" by Sheldon Natenberg