And how do you calculate the current premium, ie. before opening the position?
risk free rate in black-scholes?
- Thread starter MK020
- Start date
Using black76 model. Black model is similar to black scholes which uses future price instead of spot.
What would the future price be in the given example, when let's say the current price is 100 ?
Is it 110 or 115 for the model you mentioned?
Use put- call parity to get the future price. Future=(100 call price)- (100 put price) + 100(strike).
And how does one get the call price and the put price in the first place to apply this your funny looking formula above?
And: now you seem to mean by "future price" the option premium, whereas in your previous posting you explicitly stated that it means the future spot incl. the risk-free-rate etc. Just confused and confusing.
And: why should one use Black-76 over BSM ? Is there any advantage? IMO not.
And: BSM accounts for earnings yield (aka risk-free rate) as well dividend yield. I don*t think Black-76 can use divident yield.
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It looks like you don't have basic knowledge on options. I suggest you to stop producing low effort content here.
Nope, I just don't believe BS talkers!
You have not been able to answer the simplests of the things asked.
It looked to me like just some hot-air hear-say stuff but w/o any substance when challenged.
This thread is a psychology experiment.
If you read it with earth_imperitor on ignore, it reads like a bunch of reasonable and informed people discussing the answer to the question.
You read it in incognito mode (you can see his posts) and it's basically a thread full of cow manure.
If you read it with earth_imperitor on ignore, it reads like a bunch of reasonable and informed people discussing the answer to the question.
You read it in incognito mode (you can see his posts) and it's basically a thread full of cow manure.
Fact is: none of the so-called ET experts has been able to answer this simple options question, except me, one of the few BSM experts here
The others are nothing but hot-air talkers... https://www.wallstreetprep.com/knowledge/earnings-yield/
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Earnings Yield vs. Dividend Yield vs. Bond Yield
While a sizable portion of investors make investment decisions using the amount and growth of dividends paid as a proxy for value, earnings are the real long-term driver of dividend payments (and the firm’s valuation – i.e. share price).
At the end of the day, dividends come out of the retained earnings of a company.
Therefore, it can be argued that earnings yield is a more practical metric for evaluating potential investments, which is attributable to the fact that not all companies issue dividends.
Additionally, many underperforming companies can be hesitant to cut dividends and choose to sustain a high payout for the sake of maintaining their current share price. In such scenarios, the irrational behavior of management teams could paint a false picture of the financial health of the company.
Similar to the yield on bonds and other fixed-income instruments, the earnings yield is expressed in the form of a percentage.
The earnings yield is often touted as being most useful for comparability between equity instruments and bonds and other fixed-income instruments – for example, imagine comparing a company’s P/E ratio to the yield on 10-year treasury notes (i.e. the risk-free asset).
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Here's a better practical example using IBM's stock data:Fact is: none of the so-called ET experts has been able to answer this simple options question, except me, one of the few BSM experts here
https://www.wallstreetprep.com/knowledge/earnings-yield/
"
Earnings Yield vs. Dividend Yield vs. Bond Yield
While a sizable portion of investors make investment decisions using the amount and growth of dividends paid as a proxy for value, earnings are the real long-term driver of dividend payments (and the firm’s valuation – i.e. share price).
At the end of the day, dividends come out of the retained earnings of a company.
Therefore, it can be argued that earnings yield is a more practical metric for evaluating potential investments, which is attributable to the fact that not all companies issue dividends.
Additionally, many underperforming companies can be hesitant to cut dividends and choose to sustain a high payout for the sake of maintaining their current share price. In such scenarios, the irrational behavior of management teams could paint a false picture of the financial health of the company.
Similar to the yield on bonds and other fixed-income instruments, the earnings yield is expressed in the form of a percentage.
The earnings yield is often touted as being most useful for comparability between equity instruments and bonds and other fixed-income instruments – for example, imagine comparing a company’s P/E ratio to the yield on 10-year treasury notes (i.e. the risk-free asset).
"
https://www.investopedia.com/articl...ow-build-valuation-models-blackscholes-bs.asp