How to calculate implied volatility of a stock?
- Thread starter trend2009
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My question is how to calculate implied volatility of a stock given I have already known the implied volatilities of all options associated with this stock?
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use atmf 1m 100.
what is atmf 1m 100?
Trick question??
...Look at Historical Vol/ Realized..
Unless you are referring to the rolling 30 day Implied??
...Look at Historical Vol/ Realized..
Unless you are referring to the rolling 30 day Implied??
I thought the IV is "deriving" from the bid/ask value, no?
Since the other variables (Price, Strike, IR, Days to expiration) are known, all what left to do is to reverse engineer which IN value is matching the option price.
So you start with possible IV range, let's say, of 10-200, then you "ask" if Option Price higher or lower than 100. If the answer is lower, you "ask" if the option price is 50. And if its higher, then now IV range is between 50 and 100. Rinse and repeat until you match the option price.
Years ago, I've read somewhere that smart algo can match the option price with max of 6 hits for starting range of 0 to 250.
Since the other variables (Price, Strike, IR, Days to expiration) are known, all what left to do is to reverse engineer which IN value is matching the option price.
So you start with possible IV range, let's say, of 10-200, then you "ask" if Option Price higher or lower than 100. If the answer is lower, you "ask" if the option price is 50. And if its higher, then now IV range is between 50 and 100. Rinse and repeat until you match the option price.
Years ago, I've read somewhere that smart algo can match the option price with max of 6 hits for starting range of 0 to 250.
at the money forward 1 month 100 strike option.
Stocks do not have an implied volatility, only options do. Stocks only have a realized volatility. Implied is forward looking while realized is backward looking. Given all the other inputs to the BSM model, implied is the variable that solves for the current market price of the option. If implied turns out to be higher than realized over the given time period, you can make money by selling options and delta hedging. And if realized is higher than implied you can make money by buying options and delta hedging. Either way, you need to forecast what the realized vol will be over the holding period relative to what was implied when you bought / sold. When ppl refer to the implied volatility of a stock they are usually actually talking about the implied vol of an ATM (call + put)/2 constant maturity 30 days out.
Thanks