IMO, a mispriced option is when the premium for a particular strike is wide off of what it should be when compared with the other strikes of the same option. For example if the IV of a strike in the middle is bigger than that of its predecessor and successor, or is "out of order"; in that case also its price will be "out of order", ie mispriced. One can find many such examples, I'll try to find one... Here's one: Code: MO (Altria Group Inc.) CurSpot=62.07 Puts-2016-Jul-15: Strike ContractName Last Bid Ask Change %Change Volume OpenInterest ImpliedVolatility ... 62.50 MO160715P00062500 2.79 2.55 2.86 -0.02 -0.71% 3 76 18.38% 65.00 MO160715P00065000 4.35 3.60 4.95 0.00 0.00% 20 20 22.40% 67.50 MO160715P00067500 0.00 5.75 6.60 0.00 0.00% 0 0 21.28% 70.00 MO160715P00070000 14.75 6.70 10.70 0.00 0.00% 0 21 38.93% ... Here, either the 65 strike or the 67.50 strike, or even both, is mispriced because its IV is "out of order". And a fair priced one is when it is, obviously, not mispriced . Also if IV=HV then it should be fair priced as well. But, I am sure some of the experts here can maybe give you a better answer... And: You call yourself "OptionGuru" and don't know what a mispriced option is?...
Yes, these questions are serious and no joke to be seen for miles around... One day, when you decide to talk less and listen more, you might understand. This stuff isn't simple: people spend years and years trading options and yet they often learn something new. I am speaking from personal experience here, albeit it's not in equities. Really? And how, pray tell, are you going to compute the delta and those other option greeks? I won't talk about your other post. You just need to pause for a second and listen carefully to what other people are trying to tell you, esp longthewings.
You have 30 min to tell me what is the realized volatility of SPX between today’s close and Friday, March 25th 2016 at the close. Apparently, you can “easily calculate it”, so please show us.
NOBODY can calculate the future volatility, nobody! Or will you maybe claim that you can??? I'm just talking of historical volatility (HV) and current and past IVs and greeks, not that of any future.
Hey Martinghoul, is this samuel11 maybe an alias of you? Because he gives every posting, be it even trash, always a Like, even when he does not grasp a tiny bit of the discussed stuff.
What is your expertise in options? What options model and instruments do you use? You can't calculate any future value. I'm talking of current and historical values. Entry price means, obviously, the price at entry, and not the price after the entry. So then, what exactly don't you understand in my statement in the quote above? I asked him some serious questions, am curious what he will answer...
Well, I dunno, let's see... I've been a buyside risk taker for more than a decade. Interest rate and, to a lesser degree, FX options are among the products I routinely rely on. Please note that I don't consider myself an expert by any stretch of the imagination. I have colleagues who are infinitely more knowledgeable. If you have to know, I mostly use multiple different variants of what's known as a SABR model. For reasonably vanilla products, that is.
Some people seem not to understand this simple logic: When tomorrow comes then it will be the present. And then you can calculate its values because it is then the present... OMFG!
Samuel11 is an ET sockpuppet. Below is my definition of a sockpuppet from your Detecting Sockpuppets thread. Link to: Detecting Sockpuppets
I would like you to explain to me the precise method which you indend to use to compute the instantaneous ("current" in your terminology) delta (let's leave the other greeks out of it) of an option and which inputs you are going to need to perform this calculation. Please feel free to provide as much detail as you like. As to you asking questions, is the bit where you describe what you're told as "complete utter BS" part of one of them? If so, you sure have a most curious way of questioning people, I must say...