Help On Option Pricing

lukskywaker

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I need the following clarification on option pricing:
- If I want to price a call option with 90days to maturity, how should i calculate volatility. Let us assume that I have 300 days: data points. Kindly suggest the formula??

:):)
 
Option Price Calculator

A option priceing calculator =)

If you want the formula it is Black-Schole formula. However, it doesnt work on all types of options. Dont remember which type it works and dont work on. :)
 
The volatility to plug into an option pricing equation is a forward looking one, not a backward looking one. The only way "historical" volatility is of any use to you is if you expect the future variance in prices to be the same as the past. If you feel that's the case, then go ahead and plug in the annualzed standard deviation of returns. If not, you going to have to develop and expectation and use that as the vol value.
 
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