Is Black-Scholes the Right Option for Options?

indahook · Aug 3, 2003

You guys are learning me good

. As a equity trader who is just plain bored with straight directional plays, options have become a more intellectual pursuit to feed my ongoing hunger for mkt knowledge.
If any of you could suggest a few books on options trading that you found invaluable please share the names.

Thank you,
inda.

theTaoTrader · Aug 3, 2003

Quote from nitro:

Ok,

I figured it out. Looks like the volatility they are using is some sort of calculation based on more recent values than I was using. When I use an ABS Vol of ~33.00%, my numbers look almost identical to theirs.

nitro

Exactly. The implied volatility is based on the option price which is determined by supply/demand. If someone's own research indicates the volatility in the future is higher/lower than this IV, he would buy/sell the option (i.e. he would long/short vega).

theTaoTrader · Aug 3, 2003

Quote from nitro:

Huh? Of the 500 companies in the SP500 that have reported, more than 2/3 of them beat expectation, though looking forward they are once again catious of future earnings.

nitro

You are right. Many companies beat current quarterly earning and then cautious about future earnings, sort of "canceled" each other.

theTaoTrader · Aug 3, 2003

Quote from indahook:

You guys are learning me good . As a equity trader who is just plain bored with straight directional plays, options have become a more intellectual pursuit to feed my ongoing hunger for mkt knowledge.
If any of you could suggest a few books on options trading that you found invaluable please share the names.

Thank you,
inda.

Natenberg's Option Volatility & Pricing is a classic. Mcmillan's Options As A Strategic Investment is another.

indahook · Aug 3, 2003

Quote from theTaoTrader:

Natenberg's Option Volatility & Pricing is a classic. Mcmillan's Options As A Strategic Investment is another.

Thank you very much Tao.

murray t turtle · Sep 3, 2003

Quote from theTaoTrader:

Natenberg's Option Volatility & Pricing is a classic. Mcmillan's Options As A Strategic Investment is another.

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Add a third ---- Big Trends;
by Price Headly and has excellant price insights on stocks & options.

indahook · Sep 3, 2003

Quote from murray t turtle:

========================================
Add a third ---- Big Trends;
by Price Headly and has excellant price insights on stocks & options.

Thanks

chasinfla · Jan 21, 2004

can one of you options gurus tell me which model might be a reasonable approximation of value for EOD calculations?

yes, I suppose I could read one of those books...

thx

metooxx · Jan 21, 2004

Quote from chasinfla:

can one of you options gurus tell me which model might be a reasonable approximation of value for EOD calculations?

yes, I suppose I could read one of those books...

thx

EOD print is probably the last trade you are looking at; which could have been at noon. No real relation to the underlyings close unless you are following the bid/ask or a very active option.

BS is close enough for what you want.

But, the answer is probably useless ...

T-REX · Jan 21, 2004

In order to be an effective trader of Options you must 1st master the underlining Futures and or Stock you are trading and have a full understanding of where the market is headed.

Example: If you believe that the ES is going up then you can buy the Sept 1170 Call on the Big S&P 500.

If you believe that the ES is going to fall then you can either sell the Sept 1170 Call on the Big S&P 500 or simply buy a Sept 1050 Put.

There are a few more good alternatives and strike prices but I thing you get the point and I did not us BS to determine the above.