trade in beta neutral ratio..... how does one beta neutralize a straddle in a high vol high beta stock.. beta being a weighting of vol of ssingle name against index... thats buying vol in single name.. you offset this by selling vol in index via a ratio formed out of the beta.. ?
<<< - The payoff (premium) of a higher volatile options is lesser than that of a lower volatile options. >>> If you had substituted the word "probability" for the word "payoff", and said: The probability of a higher volatility trade being successful, is lesser than that for a lower volatility trade"..... that would make more sense. And since the "probability" of the higher volatility trade being successful is less likely, that option pays more than the less volatile trade does.
But as demonstrated this is NOT the case, cf. the tables Compare for example just the payoffs for spotdelta 1% or 2%...
Sle, this guy's a troll. No one can be pretend to run simulations and black-scholes and be this stupid.
Yeah, if arguments are out then get personal... I filed a complaint to the admin. The troll is yourself, as you have nothing constructive to contribute to the discussion.
In the table you posted it looks like you get BS prices on the same time t, so your %payoffs are only relevant to price jumps. Obviously not impossible but it's not the most realistic simulation Also how often do you think the price will move (jump) 2% for a 20%vol option compared to a 40%vol one? If you still choose to ignore feedback from experienced posters here (def not including myself) then I'll believe too that you are trolling
Sure it must be the same time in such a comparison, otherwise such a comparison wouldn't make any sense. The table says: if at time t the price of the underlying moved x% since opening the position then the payoff (ie. the change in premium) is that %. Yeah, this is a good argument and indeed debatable. I welcome constructive critism of my arguments as it can benefit me, and the audience, to recheck the own pov. It's not my intention to troll here, I just share my findings of my research and experience, and invite to a constructive discussion about these findings.
Bit confused from what everyone is saying but my understanding is that in a volatile market the price of an out of the money option is higher that of the same option in a less volatile market . (in a volatile market the otm options has more chances to bocome in the money ) So i guess i totally disagree with the topic starter
I invite you, and everybody else, to just do the maths and see it yourself, please. There are enough online options calculators, just google. Especially with OTM options the advantage (ie. the profit) for low vola options is even much bigger than for ATM or ITM options.