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As I already said, this is a theoretical example, with the values picked at random, just for the sake of demonstration. The question to which I am trying to get an answer is this: Does it make sense to calculate the IV of the whole strategy? Or is IV a figure that has sense when applied to...

The IV curve is somewhat theoretical, of course. The figures were selected to make the example more striking. The main question is: does it make sense to calculate the IV of the whole strategy? Or is IV a figure that has sense when applied to individual options only?

I came across a kind of paradox while trying to calculate the IV of a butterfly strategy. 1) Let’s suppose that we create a 90 / 100 / 110 1-year butterfly using call options and that the IVs of call are 30% / 40% / 50%: Link to strategy: http://optioncreator.com/st7wkz0 2) When I tried to...

Thank you, Robert, I will think it over.

For American put it is clear now. Still a bit confused as to why time value can be negative for European puts...

Robert, this is a European options calculator (because the Black-Scholes model works only for European options, not American ones). I guess with American options there will be no negative time value. As for the rate and the dates, since I am calculating the theoretical value of an option - the...

Hi Robert, if we look at a standard Black-Schole calculator, then we can easily see that a put can have a fair value smaller than the intrinsic value: Intrinsic value = Max (Strike - Price; 0) = 100 - 50 = 50 Black-Scholes value = 45,1196

I recently by chance discovered that put options can have a negative intrinsic value, which can be easily seen on this graph: Call options, on the other hand, always have a positive intrinsic value. The question is: why can puts have a negative intrinsic value? What is the easiest and...

There are so many ways to manage this risk: 1) Use a simple stop loss and close the trade if it had reached a certain loss level. 2) Hedge the position by shorting a stock (so that the delta of the position becomes zero). 3) Buy another put (with a different strike or the same, doesn't...

Victor, I think the easiest way to determine whether a certain strategy is long or short volatility is to see how the value of the strategy changes when volatility changes. A butterfly has options that are both purchased and sold, and the problem is that at certain prices the butterfly may be...

The instrinsic value of a call is: Max (Price - Strike; 0) The intrinsic value of a put is: Max (Strike - Price; 0)

Victor, I think the best way to understand how an option strategy works is by looking at the option strategy chart. Here you can see what P/L you will make on your buttefly at expiry and 1 day before expiry: I saved your strategy here, so you can see and play with it...

Brighton, thank you, I see. Seems a bit strange that companies like Yahoo or Google cannot provide them for free - like they do for stock quotes, for example.

Thank you for this link. However, IV and HV cannot be downloaded from this site, unfortunately.

The bull call spread picture is not displaying properly in my previous post, here it is:

This doesn't seem to be a free source of implied volatilities:

Is there a place to download historical values for IV (implied volatility) for American stocks for free? I need IV history to compare it with historical volatility, and make decisions to buy / sell volatility.

I am not sure about the date of expiry of your bull call spread - calculations show that it is about 37 days: First of all, it seems that the call that you sold had a higher IV than the call that you purchased - this means that the IV smile is such that you paid more for the 12 call than you...