The best options strategies

[destriero]

IMO, a mispriced option is when the premium for a particular strike is wide off of what it should be when compared with the other strikes of the same option.
For example if the IV of a strike in the middle is bigger than that of its predecessor and successor, or is "out of order"; in that case also its price will be "out of order", ie mispriced.
One can find many such examples, I'll try to find one... Here's one:

MO (Altria Group Inc.) CurSpot=62.07 Puts-2016-Jul-15:
Strike     ContractName    Last     Bid     Ask     Change     %Change     Volume     OpenInterest     ImpliedVolatility
...
62.50     MO160715P00062500    2.79    2.55    2.86    -0.02    -0.71%    3     76    18.38%
65.00     MO160715P00065000    4.35    3.60    4.95    0.00    0.00%    20     20    22.40%
67.50     MO160715P00067500    0.00    5.75    6.60    0.00    0.00%    0     0    21.28%
70.00     MO160715P00070000    14.75    6.70    10.70    0.00    0.00%    0     21    38.93%
...

Here, either the 65 strike or the 67.50 strike, or even both, is mispriced because its IV is "out of order".

And a fair priced one is when it is, obviously, not mispriced . Also if IV=HV then it should be fair priced as well.

But, I am sure some of the experts here can maybe give you a better answer...

And: You call yourself "OptionGuru" and don't know what a mispriced option is?...

The 70P would not trade anything near 38vol. It's $4 wide, for f*cks-sake. Next time, use the mid to calc the strike-IV. Dumptruck.

 

[samuel11]

NOBODY can calculate the future volatility, nobody! Or will you maybe claim that you can???
I'm just talking of historical volatility (HV) and current and past IVs and greeks, not that of any future.

That was the point of me asking you that question. You do not know the realized volatility in advance during the period when you will own/short the option.

 

[samuel11]

Samuel11 is an ET sockpuppet. Below is my definition of a sockpuppet from your Detecting Sockpuppets thread.

Link to: Detecting Sockpuppets

Hey ForexForex, why did you have to get a new alias?

 

[botpro]

I would like you to explain to me the precise method which you indend to use to compute the instantaneous ("current" in your terminology) delta (let's leave the other greeks out of it) of an option and which inputs you are going to need to perform this calculation. Please feel free to provide as much detail as you like.

Nothing easier than that! Really! Just use the BSM function, I can even give you the formula for Delta calculation and some more,
in case you really don't have them... Just let me know!

Using the market price one finds the IV by using intervall-halving (ie. performing a binary search).
And then everything is available: delta, gamma, everything... Even realtime!

 

[Martinghoul]

Nothing easier than that! Really! Just use the BSM function, I can even give you the formula for Delta calculation and some more,
in case you really don't have them... Just let me know!

Yes, pls, kindly give me the formula, will you?

 

[samuel11]

Yes, pls, kindly give me the formula, will you?

It’s a secret!

 

[botpro]

The 70P would not trade anything near 38vol. It's $4 wide, for f*cks-sake. Next time, use the mid to calc the strike-IV. Dumptruck.

The table data is from finance.yahoo.com, Dumbtruck!

 

[Martinghoul]

Nothing easier than that! Really! Just use the BSM function, I can even give you the formula for Delta calculation and some more,
in case you really don't have them... Just let me know!

Using the market price one finds the IV by using intervall-halving (ie. performing a binary search).
And then everything is available: delta, gamma, everything... Even realtime!

Ah, fantastic... So that means that you imply the vol from the market price and then compute delta using that vol. Now you're an intelligent young man (I presume). So tell me, doesn't the above suggest that delta is, in fact, determined by the price of the option?

 

[botpro]

Yes, pls, kindly give me the formula, will you?

I really can't believe that you don't have the formula for delta calculation.
Man the web is full of the formula. Here, even on wiki you can find the formulae for all the greeks:
https://en.wikipedia.org/wiki/Greeks_(finance)#Formulas_for_European_option_Greeks

In my BSM code here ( http://www.elitetrader.com/et/index...es-merton-options-pricing-engine-in-c.297419/ ),
just define the Delta variable and add to the end of the calc() func the following code to get the Delta calculated:

Call.Delta = p1;
Put.Delta  = -(1.0 - Call.Delta);

 

[Martinghoul]

I really can't believe that you don't have the formula for delta calculation.
Man the web is full of the formula. Here, even on wiki you can find the formulae for all the greeks:
https://en.wikipedia.org/wiki/Greeks_(finance)#Formulas_for_European_option_Greeks

Brilliant, thank you... I confess that I was hoping for something a little more sophisticated from you, but this will do. Now maybe you could respond to the question I asked in my previous post.