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@earth_imperator 1. Use a local volatility model to estimate a likely IV at price S and time T for both assets 2. Plug those values into the call and put functions that take the BSM inputs 3. Repeat for all spot values within the expected range no guarantees that this is the correct approach...

Gentlemen, thanks a lot for your contribution. Now I can finally pull the plug on this chapter and move on.

its not really an interpolation because the curve is parametric, the inputs are spot, dte and six other parameters related to the curve shape. but yes of course once you have it you can estimate the values at otc strikes. what about the related probability density function ? Also that quite...

Had to look up 'coprolith', but besides this, thanks A lot man, this is giving me the closure I was looking for..

your code is difficult to read, seems that you are hardcoding all scenarios instead of creating a flexible structure. But I dont know your language so maybe Im wrong. Said this, selling naked puts and legging in the long after so many days (without any other edge) is no better than selling...

Correct. This is also what the rational part of my brain is telling me. And trading should be a rational endeavor.. and yet so many times the psychological part messes things up..

ha.. no idea if this is the right place to post.. I guess it's something in between options and trading psychology.. anyways.. it's already been more than one year that I religiously download every day the option chain for the assets I'm following, and for each asset and each tenor calibrate...

tbh I would also feel triggered if after replying politely to a question to the best of my knowledge, some random dude started attacking me out of the blue even linking my previous posts.. when we disagree with someone, we should all take one step back and honestly try to debate the idea rather...

OP, the problem with options is that there is no absolute 'best' , any option play or structure is good under certain circumstances, bad in others. A screener works according to your search criteria, but you must know what you are looking for. In general selling naked like you do is not...

OP, besides a screener, some basic knowledge of how volatility works should be your next priority.

Hmm that academia guy knows his s*!@t!

haha ok let's talk again in the future, when I'll be surely full of mint.. ..Or maybe full of something else :p

ok let's take one step back. Here I'm not trying to guess prices, but modeling a scenario, a "what if.. "case. So I assume that stock A in the future will get to price X. I have verified that stock A and B are not only correlated with a factor of beta but also cointegrated, which makes me...

Hi BWS, I looked it up a bit, actually there is not a single way to estimate beta because it's.. well, an estimation. Your method is fine and generally accepted, the method I use is to do a linear regression to find the best fit for the formula Y=alpha(the intercept)+beta(the slope...

Hello all, trivial question (of which however I'm not so sure): I have stock A that I expect to reach a certain value in X days, and I also have the beta coefficient of the relation of stock A and stock B over a comparable timeframe. (and yes they are highly correlated and cointegrated) (just...

also, going back to the original topic, you should watch the rolling correlation of the two and try shifting it back n times. If the correlation relation is not holding well over different periods, then this is a red flag

In colin bennet's book, I remember a section where he compared/backtested the different methods and beta adjusting was the most accurate. Of course then there is the problem to decide on which timeframe to calculate beta :banghead:

I also remember seeing the first posts of BWS, at the time I had already been dabbling for a while and he was a total noob. But I bet he knows a shitton more than me now..

all my worst losses have always been due to a naked something..

sorry but I don't get the 2x theta part. Theta is supposed to represent the daily time decay, so taking this sentence at face value would mean really an abysmal amount. What is the implied (pun intended) part that I'm missing?