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Sure you can forecast volatility without calculating historical volatility, what's stopping you from doing it? Where exactly does it say that forecast has to be based on historical data? By the way, based on your post, all those quant firms employ rocket scientists just so they can calculate...

Yes, that's it. You are starting to get it. First you need to estimate the volatility to use in the pricing model. I'm not going to explain GARCH here as it is beyond this discussion, I suggest you Google it for more information. Once you have found the volatility estimate you are happy with...

Let's put it this way. The parameters that you need to input into an option pricing model are: - price of underlying - strike price - time to expiry - risk free interest rate - dividends - volatility The volatility is the estimated future volatility. Without the volatility parameter...

You need to know the volatility to use in the pricing model such as Black-Scholes. The specific term implied volatility stands for volatility that you get by reversing a pricing model such as Black-Scholes when you input the market price of an option and then solve for volatility. Implied...

No, not true! The parameter that the model uses is volatility and NOT implied volatility! As cvds16 mentioned, implied volatility means the volatility that is implied by market prices of options. In order to get that you need an option pricing model, which you then use along with market option...

The trading platform I use has a built-in pricing model, which calculates the IV for all options. if you want to calculate the IV yourself you WILL need an option pricing model! I'm not suggesting you calculate it by hand using a calculator, a pen and a piece of paper. You can build a pricing...

Why would it be funny? How else can you calculate the IV?

Plug in the market price of an option into an option pricing model to get the IV for that particular option.

That's a question to ask your broker. Nobody else knows the answer to it.

Forget about arbitrage unless you can predict volatility better than the market. The important bit is predicting volatility to use in the pricing model, not which pricing model you actually use. Without good estimates it's garbage in garbage out!

Market makers don't really create anything. If someone comes in and wants to buy or sell an option a market maker would take the other side, so it's not given that a market maker starts with a short option. And there's no set number of contracts that are "created". An option contract...

They specialize in options, but they've been slowly adding various futures contracts.

It's McMillan who wrote that book not Cottle!

No worries, I thought I'd give you an advance notice as a lot of people look for free lunch when they ask similar questions. You can also search for past discussions as this issue has been discussed numerous times here.

Any decent book which covers option pricing also does dividends. By the way, there's no free lunch in dividends.

The vertical has a range of outcomes between the strikes plus a max profit/loss if outside the strikes. In a binary it's just a max profit/loss, no range.

Well, if you can build a better model then sure, go for it.

And how do you define IV mispricings/discrepancies? There's no single correct IV value, so how would you determine that a particular IV number is "wrong"?

Sounds like you are desperate and asking for a confirmation that it was a good trade. Btw, from 3 down to 1.99 is 33% not 50%!

The basic arbitrage (put-call parity and etc) is absolete for a retail off-floor trader.