Some obvious facts...

Quote from sle:

1 std = 0.2, agreed?
atm call price approximately 0.08, agreed?
B/E = price / stdev = 0.08/0.2 = 0.399
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Hmm. I get a call price of about 0.5.
What is this ratio supposed to tell at all?
I don't see it's importance for making different vola comparable.
 
Quote from mutluit:

Why not generalise it and say "payout differs by vola at implied imagination"? :D
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I don't want to get into the ring here, I do that enough already, but it's fairly obvious what sle was stating. No?
 
Quote from atticus:
I don't want to get into the ring here, I do that enough already, but it's fairly obvious what sle was stating. No?
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No, his and your calculations seem to aim exercising options,
I on the other side am interessted profiting by trading the crap in as short a timeframe as possible (upto about 2 weeks), ie. profiting by the premium delta only.
 
Quote from mutluit:

No, his and your calculations seem to aim exercising options,
I on the other side am interessted profiting by trading the crap in as short a timeframe as possible (upto about 2 weeks), ie. profiting by the premium delta only.
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In this case, how could you ignore the implied volatility and simply use realized vol?
 
Quote from mutluit:

No, his and your calculations seem to aim exercising options,
I on the other side am interessted profiting by trading the crap in as short a timeframe as possible (upto about 2 weeks), ie. profiting by the premium delta only.
More...

Increase vola and calc the payout (from ATM) to 1SD. Use the same figure to calc ATM vola and 1SD for jump in vola. I thought it was a language barrier but it appears you genuinely don't get it.

Does the payout on the ATM option increase or decrease, at 1SD, for each jump in implied vola?
 
Quote from atticus:
Increase vola and calc the payout (from ATM) to one sigma. Use the same figure to calc ATM vola and sigma for jump in vola. I thought it was a language barrier but it appears you genuinely don't get it.
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I'm doing nothing else since the very beginning.
The only difference is: I didn't use SD, rather took a realistic spotdelta of say 3% and so compared them with each other.
And in such a comparison a low vola option gives more than a high vola option. That was my whole point.

will answer your other example shortly...
 
Quote from atticus:
Increase vola and calc the payout (from ATM) to 1SD. Use the same figure to calc ATM vola and 1SD for jump in vola. I thought it was a language barrier but it appears you genuinely don't get it.

Does the payout on the ATM option increase or decrease, at 1SD, for each jump in implied vola?
More...


Ok, when using StdDev as the "borderline" then high vola gives indeed some more profit for Calls, BUT the profit of lowvola Puts is higher!

Summary:
C@+1SD: lovola=66.6% profit vs hivola=70.1% profit
P@-1SD: lovola=60.1% profit vs hivola=57.1% profit

Code: 
Spot=100.000 Strike=100.00 ExpDays=40 HoldDays=10 IRpct=0.000000% VolaPctS=20.00000%  -->  Call=3.171736  Put=3.171736
Day 10: Annual          : Vola=20.00%   +1SD=22.14%     -1SD=-18.13%
        Daily           : Vola=1.26%    +1SD=1.27%      -1SD=-1.25%
        Period(10 days) : Vola=3.98%    +1SD=4.06%      -1SD=-3.90%     C@+1SD=5.2852(66.6%)    C@-1SD=1.1809(-62.8%)   P@+1SD=1.2288(-61.3%)   P@-1SD=5.0791(60.1%)

--------------------------------------------------------------------
Spot=100.000 Strike=100.00 ExpDays=40 HoldDays=10 IRpct=0.000000% VolaPctS=40.00000%  -->  Call=6.338451  Put=6.338451
Day 10: Annual          : Vola=40.00%   +1SD=49.18%     -1SD=-32.97%
        Daily           : Vola=2.51%    +1SD=2.55%      -1SD=-2.48%
        Period(10 days) : Vola=7.95%    +1SD=8.28%      -1SD=-7.64%     C@+1SD=10.7818(70.1%)   C@-1SD=2.3132(-63.5%)   P@+1SD=2.5046(-60.5%)   P@-1SD=9.9576(57.1%)
 
Quote from sle:
In this case, how could you ignore the implied volatility and simply use realized vol?
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No, no, I'm not fixated at HV, it is just an orientation, in reality I start at HV and inc or dec it, ie. using such input params:
VolaAtStart=20%, VolaOnLastHoldDay=30%
 
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