Periodic Implied Volatility

Discussion in 'Options' started by mikgama, Feb 7, 2018.

  1. mikgama


    What is the O/N implied volatility if one year implied volatility is 16%
    jys78 likes this.
  2. jys78


    Hmmm at this short time frame, using 252 (trading days) vs 365 days (calendar time as in Black Scholes etc.) can make a difference in calculating daily vol. Far as I can tell most gurus use 252 but it's debated.

    But you're asking about overnight (17.5 hours).

    So, overnight IV = Price * .16 * sqrt((17.5/24)/252) ... maybe :) Just taking a stab at it.

    Wonder when they'll start offering hourly expiration?
  3. Robert Morse

    Robert Morse Sponsor

    What is O/N? Overnight?
  4. mikgama


    Yes. Basically I’m asking if it’s possible to derive overnight implied volatility if given one year implied volatility?

    If not, if one year Implied vol is 16, how do we find the expected daily movement of the underlying? Is it...

    16 * sqrt(1/365) = 0.837 ?
  5. Robert Morse

    Robert Morse Sponsor

    IMO, the formula was not meant to do that, but others might have more knowledge. The formula was meant to only use the days the market is open. About 252.
  6. newwurldmn


    16*sqrt(1/252) ~= 1%

    You can't derive expected overnight volatility without some assumptions.