Option Question about Delta

[bwolinsky]

Quote from atticus:

NO, lol. I never stated that; implicitly or explicitly. That most certainly is not my argument.

Beau's deleted opus: http://tinypic.com/r/iptvv5/5

Yes, it is, atticus.

Delta will predict the change to within 5 cents of the option's change, and that's good enough for me.

 

[atticus]

Quote from bwolinsky:

Yes, it is, atticus.

Delta will predict the change to within 5 cents of the option's change, and that's good enough for me.

de minimis!

 

[bwolinsky]

Quote from atticus:

Probability meaning (derived from) vola? What if you double the vola from 35% to 70%? Then what is the delta of the 5C? Are you playing, or seriously injured?








.

Vola increasing to a double is indeterminate as to when the market will recognize this change, and I'm not pulling greeks from nowhere. We're talking about delta.

 

[bwolinsky]

Quote from atticus:

wheeeeeeeee! PROBABILITIES! academic vacuum! Beau says it won't move a buck. win.

I've said the option will move $1 if the underlying does. I'm just saying it's unlikely.

 

[atticus]

Quote from bwolinsky:

Vola increasing to a double is indeterminate as to when the market will recognize this change, and I'm not pulling greeks from nowhere. We're talking about delta.

We are sorta attempting to talk about delta. Let's say, as a purely hypothetical exercise (recall the academic vacuum), that vola did rise to 70%. Can you approximate the 5-strike delta with shares also at 5? (Shhh, let's dream it's determinate-able).

Is this beyond your vast capabilities as a Master qu(a)nt?

 

[rmorse]

If you were pricing a binary option, how would you calculate the value? You have to calculate the probability of the security being in the money on expiration.

 

[bwolinsky]

Quote from atticus:

Yes folks, he typed it.

<i>
Delta's not a probability. It isn't likely FTR will move $1 which is what we'd expect the option to move. Since it won't, the option will behave according to delta up until the point where options call buyers realize it's going up to the next strike, and that will change delta's value whenever that happens. </i>

If you read this with better than 8th grade comprehension, you'll see that I did say that we would expect the option to move $1 but the likelihood FTR really does isn't high.

 

[atticus]

Quote from bwolinsky:

<i>
Delta's not a probability. It isn't likely FTR will move $1 which is what we'd expect the option to move. Since it won't, the option will behave according to delta up until the point where options call buyers realize it's going up to the next strike, and that will change delta's value whenever that happens. </i>

If you read this with better than 8th grade comprehension, you'll see that I did say that we would expect the option to move $1 but the likelihood FTR really does isn't high.

I can't fix you, Beau. I can only bear witness to the carnage.

 

[bwolinsky]

Quote from atticus:

I can't fix you, Beau. I can only bear witness to the carnage.

You're so immature sometimes, atticus.

Read it again. It's obvious I know the option <i>should move $1.</i>

 

[atticus]

Quote from bwolinsky:

You're so immature sometimes, atticus.

Read it again. It's obvious I know the option <i>should move $1.</i>

Should, but....