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I'm not paid by neither Taleb nor Haug, and my opinion is that they wanted to argue against academic gurus. In fact, their point were the knowledge and acknowledge that risk can't be globally wiped out by a dynamic replication strategy, as gurus claimed. Models can't be taken as a given and...

I didn't see this message, sorry. Take a look at Bachelier thesis. We are in 1900. You would find everything you need. Bachelier was the first guy to model stochastic process with brownian motion (arithmetic one) 4 years before Einstein did. As you got the price, you got the delta. If you...

Dmo, You are the first guy I read always talking about implied volatility and who delta hedged out of the money put with Black and Scholes one. In model we trust.:p Useless to say that implied volatility notion is only there to prove the model doesn't fit reallity.

Please Dmo, replace this article with the context. Both claim that Black and Scholes only steal an 1900's option model, Bachelier's, and never thank Ed Thorp to be the one who derives the actual form. They were happy then to accept the one million dollar for the Nobelprize's formulae. Take a...

Dmo, The fact that a model is wrong doesn't prevent people to still use it. Basically, if you're using something like Black-Sholes or Cox Ross Rubinstein framework, your assumption is that volatility is a constant. How can we imagine to calculate Vega, that is the first derivative an option...

Hi Dmo, I didn't see your post before. My 2 cents.

True and it doesn't take account of neither OTC deals nor exotic products open interest. The kind of trader is important. Big open interest for puts held by hegded professionals won't have the same impact on the market than a pure directional asset manager who only wants to be hedge against...

Here a picture of european style call option. If spot soars beyond 86, call would be deep in the money and time value will get negative. http://www.hoadley.net/options/optiongraphs.aspx?divs=Y

Hi Walt, Keep in mind Nassim Taleb is a self-financing positions lover. So he never just buy out the money calls and puts. He shorts slightly in the money and at the money options to finance the previous ones. But Taleb is one of the oldest exotic option trader. His main strategy is to...

European style options are priced as actual value (present value) of expected final payoff. So it's needed to discount actual payoff by 1+interest rate for the period. Hence for deep in the money european calls you may see negative time value. If you want to see that, price a european call...

The guy who's selling them to me may bet on volatility. But one can't know. I don't and won't. Like one can' t know whether he's arbing or closing his own ones. The same way a guy is buying stocks. You can't know if it's a short covering, a long term investment or a short call / long put delta...

I'm a bad option trader and I'm forced to close a large part of my short calls for example. Because I have to do that right now, the price I'm going to pay is a pretty high offer. Of course it doesn't mean that I'm expecting a higher future volatility. How can one know that option price is...

My skepticism was about your statement that implied volatility always decreases as the market goes up and increases as the market goes down. To support your point you brought VIX behaviour as an argument. My point was that VIX is not a global market volatility index, this way is not able to...

Hi Dmo, No I don't think you were wrong about that. What I think is that relationship between asset and volatility is much more complicated. That's my point (and now yours ".... Generally yes, but not necessarily..." :p ). What I offered was to friendly check out my old PC's to try to...

It's not about "complicating things", it's about right and wrong things. If you want to teach basic option concepts or to broadly support newbies, that is a great job, you don't need to invent concepts about a possible "expected future volatility". You want to be clear: implied volty is a number...

Hi MTE, I'm sorry but it's wrong. Implied volatility is no expected future volatility. It's just a number extracted from a model, which is based on a lot of strong assumptions. How would you explain option smile this way? Different expected future volatilities at the same time for the same...

If you want to accumulate stocks, then just buy them. If selling naked (or not) puts was to accumulate, what about when option is not exercized? One keeps the premium, great, but that has nothing to do with stock accumulation. Sometimes, stocks drop for good reasons. But it's symptomatic...

I'm sorry but that way he would have twice expositions on CAD; the first he buys now, the second when he would receive the CAD. He will receive CAD, the best way is to short CAD now, and then once he gets paid in CAD in 3 months, he will be flat. OP, If options are too expensive, try...