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Fascinating and intuitive explanation. Many thanks for taking the time to share this.

Ha, it was free until 1965! If memory serves tuition was $6500 in 1993 and went above $10K by the time I finished in 1997. With room & board if could have approached $30K. Looks like it is now actually $51K, but was a "mere" $30K as recently as 2011...

Great CS program. Heheh, it was cheap in those days. I transferred there from UC Davis in 1993, and the tuition at Rice ($6500) was cheaper than in-state tuition at UC Davis with a $2K scholarship! I think it's around $42K at present. Still "cheap" compared to others. :confused:

Bisection method...A blast from Numerical Analysis class in 1996ish. So the professor was an Egyptian guy who was on sabbatical at Rice. He'd be explaining or deriving an equation, and one of us would ask for clarification. Typical response: "eeeeetz treeeveeeal" (it's trivial). I guess...

No chess for me, but I do like the multidimensional part! :D So are the smart (miserly) kids doing their own data mining to extract the vol/greek surfaces? Or is there a data provider(s) that makes it easy?

When I started analyzing the vol smile/smirk as well as the IV DTE-dependence, my eyes were immediately opened. Such a small market, with so many degrees of freedom. Some guy on this forum previously posted that he spent 16 hours a day looking at options chains. I can believe it. I assume...

Makes sense. I know that there is volatility "smile" (concave versus strike with minimum ATM) and that the smile can skew in one direction or the other. But I am trying to wrap my head around the systematic variations in IV as a given option "ages". Interesting stuff, very interesting...

For instance...on SPY: Vary the strike for a given expiration: Oct 15 446 (ATM) call: IV=12.13% Oct 15 435 (75d) call: IV=14.54% Vary the expiration for a given strike: Sep 20 435 (88d) call: IV=12.05% Oct 15 435 (75d) call: IV=14.54% Nov 19 435 (67d) call: IV=16.71% There's obviously a...

OK, so I guess I will assume the mantle of "dumb question of the day guy". Well, maybe not so dumb... I always thought that IV was a parameter driven by the market that prices options relative to the underlying's volatility. In other words, I expected the IV on a given day to be more or...

I will do this. Dusting off my Black-Scholes modeling sheet as we speak, but may take me a while to get to it (day job). Interesting to look at a short cash-secured put or put spread as an alternative to the CC/PMCC. Same net delta as the CC/PMCC, but the other greeks are completely...

You’re right about the drag from lost dividends. Short term capital gains are another drag, unless you roll your leaps after 366 or more days

Dude, you're supposed to tell my WHY I'm dumb. No doubt you'll get to take your cracks at me, but you'll have to earn it. :D

OK, so humor me here, and I will be testing your humor before you just say screw it! I have a PMCC on SPY. LEAP: 12/17 exp, 420 call, price=$34.31 - vega of 0.7 short: 10/15 exp, 448 call, price=$5.87 - vega of 0.5 If vol rises, then doesn't my LEAP increase more in value than the short...

As a fairly new options trader, I am drawn to the covered call, due to its simplicity. I specifically like the "Poor Man's Covered Call" (PMCC), which is simply a diagonal call spread. To trade the PMCC, you buy a deep ITM long call (LEAP) with an expiration "far" in the future. You then sell...

Looked up up this guy on linkedin, and I'll be damned if he wasn't 2 years behind me at Rice. I didn't know him. I guess if I would have studied math econ instead of applied math & geophysics, I wouldn't be a 47 year old douche grasping at straws on a message board. :rolleyes:

Dumb question: What is the most effective/kosher way to extract useful knowledge from those who possess it? Most of the time, due to the jargon and lack of experience/background on my part, I fail to comprehend what they are saying. Do I simply start a thread with my current trading and...

I'll tell you what I hate: a low-priced stock with 5-cent-increment option pricing and poor liquidity. Every round trip has 20 cents in rouding error. 20 cents on a 5-dollar stock is more than a rounding error!

As someone with a background in applied math, yet no formal training whatsoever in finance, I am intensely frustrated by these "greeks". We have an equation (Black-Scholes). We've defined its variables (V, S, t, IV). For instance, dV/dt is theta. Why not call it dV/dt? vonna, vanna...

I almost spit out my water when I read "welcome to the world of Theta" and saw the South Park video! F*cking options. I learned the hard way that I don't like to touch anything with < 10 DTE or anything deep OTM. I'm impressed that other people can trade that stuff productively.

If you are looking to simulate long (or short) stock, it seems that you would want to buy deep ITM calls (or puts). An Oct 11 410 SPY call has a 91 delta (essentially long stock) and trades for $37, so 11x leverage relative to long stock ($450/share) The liquidity of said options can be...