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Yes, this is a good way of looking at it. The name "implied volatility" is unfortunate because it makes it difficult I think for people to understand what it really is. Perhaps if it were renamed "true option price adjusted for time remaining and price of underlying," then the whole thing...

I guess the truth is that forecasting future volatility is, for the most part, not a part of my thinking. There are exceptions - when volatility is extremely low and I sense excessive complacency, I may forecast a rise in volatility. In that case of course I'm not assuming the correctness of...

Well whatever works for an individual is, of course, correct for him. If looking at IV as the market's forecast volatility or implied distribution puts money in your pocket, I can't argue with that. Personally, and for whatever it's worth, that approach - while interesting and consistent...

Looking at Friday's settlements on Dec. ES options - the 500 puts settled at an IV of 75%. The 1100 calls settled at an IV of 44%. So if IV is the market's consensus for future volatility of the S&P 500, is the market expecting 75% volatility or 44% volatility? An option's implied...

I see. I thought we were both talking about VIX but perhaps that was a misunderstanding on my part. I would be surprised if the inverse correlation between the SPX and the VIX did not hold for back-month IV's as well, but that one I cannot prove. It's true that there's a difference between...

Well, that too. But MAW, the main thing about which you expressed skepticism was my categoric statement that there has NEVER been a time when the SPX rose sharply over a period of days and the VIX rose too. You pointed to the extremely volatile up moves of the late nineties as times when the...

50 is just the multiplier they decided upon. It has no other significance. That's for the E-mini. CME also has a "big" S&P500 futures contract for which the multiplier is 250 - 5 times bigger. Even that is half the old "big" which had a multiplier of 500. Sometime after the crash of '87...

LOL, please let me know when this fund debuts - I'll know for sure then that stocks have bottomed!

The most useful and accurate way to look at implied volatility is this: it is the price of an option. It is the best and in fact the only way of measuring, comparing and expressing the "cheapness" or "expensiveness" of an option. The actual price of the option tells you how many dollars...

Thanks for that update. Now to complete the classic cycle, these guys will soon come back with another fund. They will explain that they went bust because they made some mistakes but learned from them, so it won't happen again. Investors will eat it up. Don't ask me why, but it happens over...

My son accidentally allowed a bad virus to install itself recently. It was really nasty-propagated itself all over the disk, very, very difficult to get rid of. Norton Antivirus was completely useless. PC Tools Spyware doctor with antivirus removed it completely. I've since uninstalled...

I double, triple and quadruple second that emotion. Any time you can buy a short option back for a nickel or a dime, just do it. Make it a habit. One of these days it will save your butt big time.

Thank you for that very honest account. What more really needs to be said? Only that Alex was fortunate to have gotten in 18 months ago and to have banked substantial gains before taking big losses in the past month. The less fortunate ones started much more recently...

In addition to what I posted above, stock options are priced off the forward price, not the spot price. So the more time remaining and the higher the interest rate used, the higher the forward price and, therefore, the higher the call delta.

If you have a simple call or put spread, your exposure to IV (vega) is actually less than being naked long or short - simply because with a spread you are long vegas in one leg, and short in another leg. So they neutralize each other to some extent. However, you still have exposure to IV...

The Hoadley software makes it quite easy to stream quotes into Excel, and works with some brokerages such as IB to grab real-time data if you have an account with them. I don't know if it's possible to get historical data though.

Calls have a higher delta than puts (speaking of absolute value of course) even when the underlying is exactly at the strike price. The reason for that is the effect of the lognormal distribution, which is assumed by every pricing model I'm aware of.

Thanks MTE. I see you're talking about the time skew. Is there any way of scanning for strike skew as well?

What a poetic and fitting final reply to the op's original question. And while those who got in early saw their 100% gains trimmed to 20%, those who got in later lost quite a bundle.

How do you get the TOS platform to scan for volatility skews? Thx.