Why don't options get relatively cheaper as volatility increases?

[taowave]

All I'm saying is the skew makes an itm option cheaper relative to its price otm....which emulates an option becoming cheaper after an expected move...in other words trend reversal probability is factored into options prices indirectly. However, it does not account for the sudden IV crush that typically occurs at a trend reversal. This flaw imo in the pricing model is the only edge that exists in options trading. I believe your arb trading exploits this flaw but is limited by directional prowess...hmmm maybe your group could use some EW members or member to help out???

 

[taowave]

WOW!!!!!!!!!!!

WXY,You are the best at what you do.

You are the best dam troll on this board,and I mean that with all due respect

You somehow get really smart dudes to engage with you,and you are never ever nasty or mean in your responces..

Whats truly impressive is you know just enough to make things interesting,and when the other side gets a bit heated,you are wise enough to come out with the 2008 lambo schtick,defusing the situation..Well done my friend....

Oh,and nows you shot,dont get distracted with MARA and CLSK

High volatility leading to higher volatility should result in lower relative option prices.[\quote]

 

[wxytrader]

Tao I can't read your reply.

Anyway options prices are allowing for trend reversals so you guys apparently don't know shit...including D

So you have the same volatility for atm calls/puts, but have a huge "Un-parity" with prices. What is causing the call options to be so expensive if its not IV? I thought that's where price comes from?

 

[taowave]

You should be able to see my response..

Tao I can't read your reply.

Anyway options prices are allowing for trend reversals so you guys apparently don't know shit...including D :

Look at the skew on calls to puts....do you see any parity?

 

[Steve777]

Well that's an interesting point about how mass behavior of people doing something weird like zero day expiration could cause the model not to fit as well during those times that would be an interesting hypothesis to test

 

[Steve777]

Well that's an interesting point about how mass behavior of people doing something weird like zero day expiration could cause the model not to fit as well during those times that would be an interesting hypothesis to test

That being said it's never ever been an issue for me. I think you might be under the mistaken assumption that an option model requires some exact deterministic behavior or something. It's a stochastic model so unless something happens that's drastically out of bounds the model is going to fit it and it's not curve fitting it's calibration so you can't overcalibrate because you treat something as a black box model with some neural net AI crap you very well will get curve fitting since whatever neural crap doesn't model any thing any salient feature of the process in a mathematical or conceptual way it's like applying the wrong tool for the job. My uncle used to say things like that oh can your model pick what I'm about to do well given that your options are very limited it's probably not going to be relevant. In fact I never even predicted nor do I have any immediate plans to begin doing so when trading other than the implicit prediction my position will expire profitably by virtue of the fact of the probabilities being what they are at the time. The martingale nature of price precludes predictions that are too specific