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At the money, you can approximate it as Implied Vol = P / (0.4 F Sqrt(t) ) where P is price of option, F is forward price (for short dated stuff it's ok to use spot price), t is time to expiry in years.

Exactly my point. By setting a limit order you give your broker the optionality for free, while if you are selling covered calls or naked puts vs pruchase, you do get paid for the convexity. The only difference that I'd add (and it is an important difference) is the fact that a limit order can...

How in your opinion a "covered call" is different from a GTC limit sell order?

Assuming there is not arb and the asset is fungible (bigger question) it's possible to express implied volatility in two currencies on the same asset as implied volatility on the exchange rate. In it's no different then the regular currency symmetry.

It does show the higher RISK of the underlying being up or down. Given a risk-neutral expectation E(u), you can find an infinite number of probability distributions that will fit this expectation. Some of them will show immence directional risk, don't you agree?

Well, there is such a thing as implied probability distribution, based exactly on the structure of implied volatilities. While the expectation is the same, the distribution changes based on percieved risks.

Nobody is dusputing it - just a page ago I was making a comment about using short puts vs purchase and covered calls instead of limit orders. You can augment you investment returns rather nicely like this, but you will be severy limited by the size of capital. riskarb is talking about selling...

I see a lot of smart people on daily basis doing various options trades to take directional bets on the underlying. However, the directional bets they are taking are more of a relative value style bets - various conditional spreads. These people do not really understand volatility, but I would...

You can't disagree, though that short options are a much better proxy for doing limit orders then limit orders themselfs, for a retail investor (sic! not trader). For example, if you want to own DIA at 104 (like I do for my PA), you can sell puts at 104 vs purchase. If after that I am planning...

The last page looks scary, but I am too lazy to read it from my last post (some 20 pages back) - can someone summarize the cause of penis fencing?

Could you name a 2y CUSIP that actually yields that much in USD? Looking on Bloomberg, I see stuff at 2 years out yielding ~6%, (about 150 over LIBOR, which makes sense), further out at ~3 years there are some callables yielding about 7%. It's consistent with BB ratings curve.

Why would you think so? I thought that oil and gold are almost perfect examples of inverse lognormal markets.

Commodities show call-side skew for a good reason - it is not uncommon to see rapid increases to the upside. While $90 oil sound like a rather impossible story, you might see implied vols rally jointly with the asset (i.e. in case of some terror act related to middle east) and margin calls are...

I guess the idea is that he is willing to pay $65 for it even if it's near bancrupcy and is trading at $0.10 :D.

I do this for my private account already, substituting short puts for limit orders is a no-brainer - it's dollar averaging and you get paid for it in the process.

Unless we are talking about automated trading (buy JPY in London, sell JPY in New York), arbitrage is a strategy while exploiting something what is presumed to be an arbitrage opportunity is a tactical decision. I do not see how it would be deemed to be "a system". If I was engaging in...

I don't believer in "systems" either, or it just might be that I do not understand the meaning of that word. If by "system" you mean a set of simple trades/indicators that would make money no matter what with some probability, then I don't believe in systems. What I do believe in is that...

How could you say this! If it comes from good people at CME, it's gotta be good. It's like with wine - if it's got a cork, it gotta be good.

a spanking is due, i presume? ps. a coworker retiered today, so i am drunk at 6 pm on Monday. Can't even think of what's gonna happend tomorrow..

You think insulting me would change something? I was merely making a point that in general options are priced well with regards to the information in the marketplace, disregarding distributional assumptions. Black Swan events or anything else you want to call them are an issue with...