How to simulate selling straddles?

Discussion in 'Options' started by luckyputanski, Jul 12, 2013.

  1. newwurldmn


    shouldn't the IV be closer to 32 if moving 2%/day
    #41     Jul 14, 2013
  2. 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 100).
    #42     Jul 14, 2013
  3. Hold up a sec...

    For every iteration of your straddle selling exercise, the cost of the straddle is assumed to be based on the "IV" which is calculated based on the known path of the underlying over the next 7 days?
    #43     Jul 14, 2013
  4. Yes. On the other hand I just realized my calculations must be wrong (the same prices pluged into excel showed vol of 0.31
    #44     Jul 14, 2013