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Maybe it's just late, but... what are you seeing that I'm missing? If you consider IV as a proxy for stdev, this seems correct; 68% chance of remaining within 1SD, 95% for 2SD, 99% for 3SD, etc. Unless you're concerned about them not specifying that it's annualized, or want to talk about normal...

OMG - it's still here, and making those pitiful squealing noises! I thought it had crawled off into a dark corner, but no - it's back to provide us with more entertainment! :D Let me guess: with no thinking at all, and no textbooks - in fact, with nothing but skills gained through much...

MrMuppet, you have a gift for teaching. And I say that as someone who's spent much of his life as a professional educator. As to it being "simplified", I've often told my students that I'm going to lie to them so they'll get the basics first and get curious about some things not sounding right...

Thanks, man - really appreciated! I'm rather proud of how far I've come in that time, truth to tell... definitely had help along the way - quite a bit of it from the folks here - for which I'm truly grateful.

Don't mean to crab, but the Newtonian would converge faster. :) EDIT: stolen from elsewhere, 'cause I'm too lazy to code it myself right now. n = norm.pdf N = norm.cdf def bs_price(cp_flag,S,K,T,r,v,q=0.0): d1 = (log(S/K)+(r+v*v/2.)*T)/(v*sqrt(T)) d2 = d1-v*sqrt(T) if cp_flag ==...

Nice - thanks! I can't find anything about "power vega", but I can more-or-less visualize the surface. Seems a useful concept. (Dammit, something's wrong with my Python/PySpark notebook server, or I'd go ahead and generate it. Would be nice to see how it behaves OTM/ATM/ITM. Oh well... I'll...

Hah, by comparison to some of the folks here, I'm just recently hatched and still drying my feathers. :) So "my level"... yeah, anyway. :D Just reiterating this so I get it nailed down in my own head. But I do like Cottle quite a bit; reading him was a great help in understanding synthetics and...

Looking at theta and gamma surfaces (or at least curves), especially as they approach expiration, is very instructive. That's certainly one approach. But consider that dislocations may simply reflect correctly priced-in events - and "perfect" vol curves may conceal one that's not being...

To quote @destriero, "vol = synth time." Think about it this way: when you pay for insurance, the longer the term, the more you pay. Why? Because for every unit of time that passes, that insurance company is at a risk of you crashing. So, more time = more volatility. Same deal with you being...

Betcherass. :D:D:D If I didn't pick on you, you'd get bored and start posting YouTube videos...

I'm multilingual. Math, English, Russian, baby-talk, Pig Latin... all about who I'm talking to. :sneaky:

I'm not sure what it is you think is being fudged. It's a value of volatility that corresponds to the price; in fact, many professionals don't even use the actual premium but price options in 'vols'. For many practical purposes, the volatility of an option is its price; that's why options...

It's not an output; with regard to the BSM, the IV is the unique value that must be provided as an input to produce the current option price as an output. One thing that might be confusing you is that finding the correct IV for a given price is an iterative process (Excel, etc. use a "goal...

True. I don't yet have enough experience in trading flys (doing a bunch of them now to build some intuition about how they move), but what you're saying dovetails with what I'm seeing. Thanks!

Err. First-order greeks, that is. Don't know what I was thinking.

So assuming an ATM/OTM call-side fly in an SN without a whole lot of skew and the body somewhere around 15-20D, you're going to end up slightly short vomma (since your body strike is going to be somewhere near its peak, and the wings are going to be long but a little less than the body) - right...

You know, I believe I could. I really do. Additional profit model, ya think? :)

Taleb expressed it quite well: "Option hedging, pricing, and trading is neither philosophy nor mathematics. It is a rich craft with traders learning from traders (or traders copying other traders) and tricks developing under evolution pressures, in a bottom-up manner. It is technë, not...

I'm getting quite good at spotting opportunities for profit. :) :) :)

Possibly because, like any other well-watched line that animals visit on a regular basis, it's ALSO a source of food for predators. Any time you have a place where lots of buyers or sellers are predictably going to enter, the well-capitalized pros are going to see an opportunity to thin the herd.