Tweak the Black scholes forumula to find out IV at a certain price/expiry?

W

wxytrader

*Formula
Why can't you edit the title?

I want it to calculate the IV of an option, at a certain price of the underlying.

For instance, if the underlying price hits 430, what will the IV be for the 432 call be if it is still 5 days DTE? From there I can use black Scholes to estimate the price of the option so I can set my profit taking levels.

This is basically a workaround for conditional orders to close the option when the underlying hits a certain price. My platform at the moment does not offer conditional orders for options based on the underlying. IKBR does but I am not familiar with the platform, so does TOS. Ideally though it would be best to set a limit order on the actual price of the option.

PS it bothers me that the forum does not let me put 2 spaces after a period.
 
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How far out and European or American? Better models if it's American like a simple binomial and both are free on the internet. Backsolving to capture implied, is the major use of the models. Long-dated models are not readily available for free and although you'll generate an output number with the wrong model the calculated implied as well as the other Greeks will be off. Do a simple Google search or use ChatGPT. Short dated - no dividends it's a walk in the woods. https://www.hoadley.net/options/options.htm
 
Drawdown Addict said:
You can edit the title, on the right side through Thread Tools.

https://www.wallstreetmojo.com/implied-volatility-formula/
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That's exactly what I was looking for!


destriero said:
Use the skew at the strike to model forward vol.
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I know you do not suffer fools well, but would you be able to give me an example?



Sergio123 said:
Sounds like you are just wanting the vega. That's one of the standard Greeks.
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Yes vega will help to calculate future price of an option with a 1% change in IV, but how much would the price of the underlying need to move to change IV by 1%? This is the greek I need if it exists.

I think its omega! Similar to Lambda...I will look into this further. Destriero???!!!

Omega is a measure of options pricing, similar to the option Greeks that measure various characteristics of the option itself. Omega measures the percentage change in an option's value with respect to the percentage change in the underlying price. In this way, it measures the leverage of an options position.
 
ETJ said:
How far out and European or American? Better models if it's American like a simple binomial and both are free on the internet. Backsolving to capture implied, is the major use of the models. Long-dated models are not readily available for free and although you'll generate an output number with the wrong model the calculated implied as well as the other Greeks will be off. Do a simple Google search or use ChatGPT. Short dated - no dividends it's a walk in the woods. https://www.hoadley.net/options/options.htm
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This hoadley.net site is really interesting. Do you use their products? If so, are you satisfied?
 
"This hoadley.net site is really interesting. Do you use their products? If so, are you satisfied?"
It a good sight to refer folks to. As has been mentioned the model isn't really of any value to trade. It's really about setting expectations and risk management. Our view is a copetive marketplace does a decent job of pricing. it's what you do with them that is the art.

We don't use it, but that is not a qualitative issue. We build everything we use in-house.
 
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