Pricing Illiquid Options

[gajanan]

I have a problem on hand. I am trying to price illiquid options. I need the ATM Implied Volatility which I dont have.

How do I determine this volatility from historical data?

Please let me know.

Regards

 

[options4me]

Why on earth would you want to get into "Illiquid" options.
It defeats the purpose of investing / trading. You need liquidity to be able to get rid of them when you want to take out your profits..if any.

 

[nazzdack]

1) Multiply the historical volatility by a factor of 10.
2) Widen out the bid-ask spread you are willing to quote.
3) Wait for Citadel to quote a tighter market and then "lean on" them.

 

[dagnyt]

Quote from gajanan:

I have a problem on hand. I am trying to price illiquid options. I need the ATM Implied Volatility which I dont have.

How do I determine this volatility from historical data?

Please let me know.

Regards

You CANNOT calculate the implied volatility by using historical data.

Use an option calculator and solve for volatility.

http://www.cboe.com/LearnCenter/OptionCalculator.aspx

Mark