what is going on with weekly IVs

Discussion in 'Options' started by tradelosses, Sep 12, 2016.

  1. JackRab

    JackRab

    2100-2105 puts spread value = 1.80
    1.80/5 = 0.36...
    I think @sle means that there's a 36% chance of the putspread becoming ITM? Correct @sle ?

    Since your risk is 1.80 and max profit is 5... so ... probability theory and risk/reward...
     
    #11     Sep 13, 2016
    Shay likes this.
  2. sle

    sle

    Exactly. This is actually a better measure of probability at expiry then delta and is just as easy to calculate. That's how one would price a European digital bet and it gives a true representation of the markets view on probability (obviously, including the skew and kurtosis).
     
    #12     Sep 13, 2016
    JackRab likes this.