Discussion in 'Options' started by OddTrader, Jul 12, 2009.
What's the highest IV in the past? Do you know Why?
WHY is the easy part. It was the highest because it wasn't #2 or lower
I think it was in october 1987.
The smile appeared in DOTM options after that.
Why? People where scared.
Put it this way: Do you think IV>200 is possible at any time?
1- I would have to look at the historical data.
2- Not sure that it would not violate some arbitrage relationships properties.
The answer is yes to me;
In Oct 1987, IV reached the level of 150. Pretty much no one was willing to sell anything at any price.
That will never happen again. More sophisticated now. More firms with deep pockets trading, and if things got that bad, my guess is that the markets would be closed for a chance to regroup.
I do NOT think IV 200 is possible for the VIX. It's obviously possible for individual stocks.
I remember that Monday well. Biggest loss I ever had.
Yes, it has happened with pending announcements . In my experience, most often just before FDA clinical trials approval/rejection.
And it happens elsewhere as well. Martha Stewart's company was way up there when she was on trial for the insider trading gig... I think in the mid 200's.
"During 1929, realized volatility peaked at 68%"
I'm sure the older guys told themself that they would never see that again.
We may not see it, but it can happen.
Separate names with a comma.