Noob question - IB Option Model volatility

Discussion in 'Options' started by froluis, Jul 23, 2010.

  1. froluis



    I am starting to use the IB API to display options chain in excel. I see that I have the "last implied volatility" and a "model volatility" which is slightly different.
    What is the model volatility? Why is it different than Implied Volatility?

    Thanks in advance for your help
  2. froluis


    Anybody knows where I could find information on how IB option model vol is calculated?? Does it include PUT and CALL option prices in the calculation?
    Thank you
  3. spindr0


    I'm proficient with a only a smattering of IB's technology so this is just a guess. If you are using your own pricing assumptions in their Option Modeler to determine option fair market value, you'll get different numbers.

    The best thing to do is to go to their web site and search on terms such as:

    model volatility
    last implied volatility

    The search can be a bit tedious but the answers are usually in the release notes.
  4. froluis


    Thanks for your answer spindr0. Will search IB site.
  5. froluis


    Could not find a clear answer, but I think it is because the last implied vol is calculated on the last trade while the model implied vol is calculated on the mid point. that is why there is a small difference, i guess..
  6. xyannix


    I have it setup that when I place an order in traders workstation, i have a column called implied volatily which shows me the IV of the trade I am about to place, naturely it changes with the price change but it gives me a better idea.

    The model price they show if I am not mistaken is an avg price based on puts and calls and calendar months.

    If you look at the options chain on the VIX alot of times the model price will be much higher or lower than the actual price.

    If you go into the option model there is a way to reset and reconfigure stuff.

    If you are an IB client then call customer service, they should help you. has a free options newsletter, check it out !!!
  7. spindr0


    Just curious. Is this an academic question? ...because such subtle differences in IV mean nothing for most people's trading. And trading may even be a misnomer since they occasionally execute trades but they're not trading :)

    One thing about IB is that when I've had delta neutral positions, I wasn't confident with their delta calculations because in a fast market they zig zagged erratically and I believe they were incorrect (I used an external BS model to double check).
  8. The IB options commentary includes seven tables of options market statistics, supplemented by a written summary of the day's highlights. The tables include statistics for the top 20 issues regarding: implied volatility Implied volatility
    The expected volatility in a stock's return derived from its option price, maturity date, exercise price, and riskless rate of return, using an option pricing model such as Black-Scholes.
    ..... Click the link for more information., volatility gainers, options volumes, options volume gainers, implied/historical volatilities, put/call ratios, and call/put ratios.
  9. froluis


    Spindr0, yes it is, I was wondering why the two figures were not the same (last IV and Model vol). I am not intending to trade those differences. Learning step by step :) .
  10. Interactive Brokers will continue to add more indicators as well as statistics from around the world. The IB Options Commentary statistics will be posted to the IB website each trading day In Business, the trading day is the time span that a particular stock exchange is open. For example, the New York Stock Exchange is, as of 2006, open from 09:30AM to 4:00PM. Trading days never take place on weekends. ..... Click the link for more information. from noon to 4pm ET, every hour on the hour, and will be available to the public. In addition, Interactive Brokers customers will be able to receive all the Options Commentary statistics in real-time through the IB Trader Workstation.
    #10     Aug 10, 2010