DDE definition; http://www.webopedia.com/TERM/D/DDE.html There are numerous providers of DDE. Once you have the live price in Excel you calculate the IV using your model formule, and graph it. That then gives you a real-time IV smile. Only (slight) drawback is that because IV can only be solved by iteration, it does take it's toll on the CPU (computer speed) and slows it down. One work-around (if you need it) is to use Excel manual calculation (F9) as and when you need an update.
You completely missed the point of my post. If ( the key word) , the software provider will calculate the IV the way I described (and some providers do) , you will get a 20% skew between the Current and Next month. If you believe its a "real" skew , so let it be.
skew is the difference in volatility of strike prices of the same expiration. You talk about the difference in volatility between different expiration months and thats not called the skew you can compare skew of different months tough and that can tell if the skew is expensive comparred to an other expiration month
I was obviously referring to the Time Skew(what does it calls?). What made you think that I was talking about Strike Skew in my first post ?
At least in Europe there are some arbitrage opportunities in options during the day. These are extremely difficult to see without using a real-time volatility skew, or an extremely advanced black-box program. The latter I can definetely not afford. Also I find it a lot more intuitive to look at the expirations this way instead of a huge grid. I saw the program in action at a hedge fund I was visiting, so now I am trying to learn a bit more about this subject.
Because the OP talked about volatility skew and thats always the difference in implieds of the strikes of the same expiration. Thats almost impossible to trade for a retail trader without making it a directional play. Trading the difference in skew between expiration months is even more a market maker/professional option trader play.
DeltaDelta wanting to know about how the skew works and why there is a skew is a good thing! Trying to make money with it as retail trader without sufficient capital is impossible because its for a large part the hedging of the greeks wich can make you money. If you want to learn about options buy the book option volatility and pricing (Natenberg) it covers volatilit and skew and a lot of other things about option trading
really? Hmmm , I am a retail and never placed a directional trade , but made money in options for the last four years (without ONE losing week). You are not so good with assumptions (not trying to offend you), are you? Are you one of those mighty MM/pros that you keep mentioning in your posts?
I know Nathenberg, and I still read the book regularly, this includes the chapter about implied volatilities and the skew. Maybe in the first post I did not express what I was looking for clearly: When you place a layer over the skew graph containing bars of bid/ask implied volatilies, you see the market in a very effective way. If there is a mispricing thus opening for arbitrage, you see this immediately at the specific bar; as an offset of the market skew. I just looked at the video again, and I admit this is not what they are taking about, but if you look carefully you can see all the bid/offers in implied terms.. So - I know how skews work, now I am just looking for software tools