Pricing Illiquid Options

Discussion in 'Options' started by gajanan, Feb 27, 2009.

  1. gajanan


    I have a problem on hand. I am trying to price illiquid options. I need the ATM Implied Volatility which I dont have.

    How do I determine this volatility from historical data?

    Please let me know.

  2. Why on earth would you want to get into "Illiquid" options.
    It defeats the purpose of investing / trading. You need liquidity to be able to get rid of them when you want to take out your profits..if any.
  3. 1) Multiply the historical volatility by a factor of 10.
    2) Widen out the bid-ask spread you are willing to quote.
    3) Wait for Citadel to quote a tighter market and then "lean on" them. :cool:
  4. You CANNOT calculate the implied volatility by using historical data.

    Use an option calculator and solve for volatility.