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I have access to historical daily data from options and stock prices. I would like to get a picture of the cross section relating to the IV and historical volatility (HV). My data set doesn't contain adjusted prices (for dividends, splits etc). I can get these from Yahoo for individual names but...

There was a similar post very recently that you can find some good replies from more knowledgeable ppl: http://www.elitetrader.com/vb/showthread.php?s=&threadid=278294 You need to get rid of that last conditional. Also in general the ATM quote has more "pure" information about future hist...

night trading is the new day trading : P

I think your maths are right. (Ignoring the effect of interest rate). If you get a negative price - in theory you have an arbitrage opportunity. However in this case I guess it is so small that you cannot take advantage of it(?) Get the quote for the put price too and plug the values in the...

To be honest that text didn't look a lot like an abstract - more like marketing BS. But it 's true almost in every science a lot of the academic papers are FOS which is expected if you think that academics have to publish in order to justify their salary, their research group expenses, the...

Very good read, thx Nitro. @Atticus: I guess he wants to keep his anonymity (and his sanity lol) but in case he agrees is there any way to link to any of his posts?

Looking foward to Martinghoul's next post. In the meantime I ran a quick Excel sim usng constant realised vol and constant implied vol and it is in agreement with the formula from Willmott's book. I used S(7) = S(0)*EXP(-0.5*sigma*sigma*7/365 + sigma*sqrt(7/365)*NORMSINV(RAND()) for spot. (mu =...

That's the formula I was referring before. (Willmott, p.227)

The straddle PL should be dependent on the difference between implied and realised vol. But since there is no delta hedging and each straddle will be on a single strike only, the straddle PL would have a huge variance. If you have a copy of the Wilmott book, he gives somewhere equations for...

Start with this formula in your code: http://en.wikipedia.org/wiki/Black%E2%80%93Scholes#Instruments_paying_continuous_yield_dividends For example SPY has q=2.03% - http://uk.finance.yahoo.com/q?s=SPY You can also test using the put-call parity equation.

My understanding –and someone correct me if it’s not right- was that for index under the assumption of high skew and sticky delta, the back leg of the calendar will not make as much vega profit or even lose on vega. Eg you enter the (calendar) position at spot = 100 and buy a 90 put. You...

Atticus has a lot of posts on the subject and it's best to spend some time searching for them. One of his ideas was that if you have a target price X lower than the current spot then you buy a calendar in order to have extra profit from the rise in vol. If X is higher than current spot then...

Just use ActiveX instead of DDE. IB has an example Excel sheet just as with DDE.

Cool. I can only transfer my encyclopedic knowledge so it's good when someone with experience posts. (I'm not that modest in real life, I just don't want to mislead any newbies like me in the forum) Do you think it is still worth looking for in less liquid/less poular/more specialised...

In general, part of the index options "overpricing" should be correlation risk premium. An option that appears overpriced by comparing for example IV with RV might carry a high correlation RP. My guess, or wishful thinking is that there should be index/ETF options that are overpriced. Some...

This is a good (to say the least) collection , written in VB : https://github.com/rnfermincota/EUM Also: We are all going to bed dreaming of sle's notes

This is a very important point that I have underestimated so far. I still study some of the models to get a better understanding of the dynamics but have less faith to their predicting ability. What you suggest is what makes the difference and the next step for me (not that my fisrst step is...

These 2 are not necessarily the same. With 30 days of historical data you get an estimate of the "average" volatility over this period. Now if you want to get an idea of the level of mean reversion (assuming that you believe in such a model) then you need a lot more data depending on how...

What I have done, I paid up around $700 (IIRC) and got 10 years of EOD data up to the end of 2012. The rest you can get for free from IB including higher frequency data. If you invest some time to learn basic programming with SQL etc then (I hope) you have something more powerful and cheaper...

Maybe you missed the part in the book: "You own 1000 ABCD ..." ?? So your portfolio consists of 1000 ABCD shares long and 10 calls short. Stock delta is always 1. As you said, the net delta of your portfolio is 300. This means that when the price of ABCD drops $1 then your portfolio loses...