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IV. I don't know what any of the others have to do with the cheapness or expensiveness of an option.

I promise not to use Haug's name in vain...

Here's what you're looking for: http://www.hoadley.net/options/strategymodel.htm Also, the Espen Haug book The Complete Guide to Option Pricing Formulas comes with a disk with Excel implementations of all the models he talks about in the book. Some of the sheets include a 3D modelling tool...

How far out of line did that one get? And did you ever find out why? Thx.

You mean you have yet to be forced out of your shorts? That sounds promising. Do you always do the reversals on those hard-to-borrow plays, or are the EFP's always there to do as well? Seems like the EFP's are a better bet.

You mean to tell me there really ISN'T any such thing as a free lunch? I'm devastated! Say it ain't so atti, say it ain't so.

IB is down to 0 shares of SHLD available for shorting again today. What a soap opera! Will we get closed out? Or will our hapless heroes hang on by the skin of their teeth and reap the rewards of their intrepid arb? Tune in tomorrow for the next exciting installment!

Going back to the original example knocks - this was an example of what I WOULD do if I could buy the 1100 put and sell the 1300 call at the same volatility. I would never in a million years pay 50% vol for the 1100 put and sell the 1300 call for 25% vol. When I put it on I would do it...

Well the question "which volatility do you use to manage an options position in which each strike trades at a different IV" is an excellent one with no widely-agreed-upon answer and many suggested ways of handling it. You can divide the solutions into two broad categories - calculate your...

I'm attaching a one-minute chart of the SPX vs the VIX from today's open until this minute. Ignore the opening VIX bar, which is a data glitch. If this is the best example anyone can come up with to disprove the tight inverse relationship between the SPX and the VIX, then I rest my case.

The talk of models reminds me of a time I was in a Tokyo camera store many years ago, shopping for a 35mm camera. I was (and am) a lousy photographer, and somehow imagined that a great camera would change that. Somehow the salesman picked up on that, and every question I asked him about this...

I've been pretty impressed with the Hoadley stuff www.hoadley.net Amazing set of tools for a hundred bucks or so, including something he calls OSET (Options Strategy Evaluation Tool) that models positions in 2D or 3D. It's limited to six option legs plus the underlying - although he includes...

Are they also assuming the options (or whatever derivative they are trading) are efficiently priced? If so, how would that work? Where is their edge?

Well if EMH is true then we might as well all go home and do something else. There's no point trading a market that's perfectly efficient. In my experience those who believe EMH have never made a living in the markets, and those who HAVE made a living in the markets think EMH is silly. What...

Increase, I think you just figured out how you're gonna make that first million. Or maybe it's your second or third million. Every million helps. SPAN makes money off selling software to people who want to do exactly what your purported website will do for free, so I wonder if they would...

The simulation SPAN runs is for the next day only. Margin is set based on the risk of what will happen the next day. So in that sense the 6 days remaining doesn't matter. It does matter however in that an option with just 6 days remaining has very little vega - so the vega component of the...

Actually I think it changes all the time based on volatility. I never used to pay attention to it, but I think it used to be lower - maybe $2000 per contract? Under span rules those parameters are set by the exchange (CME in this case).

When I trade ES futures, my software docks me $4500 for each contract long or short. That would seem to imply a worst case scenario of 90 points up or down.

Well of course that's true, me saying that it's obvious to me proves nothing. Just recounting my experience FWIW. At the end of the day it's just my opinion and worth what you paid for it.

Vomma? Man, you quant guys are way beyond me. Vomma sounds like what I do when I have the flu. All I can tell you is that when I was in T-bond options and the bonds started dropping and bearish fear took hold, institutions that held large long bond positions would suddenly start sending...