FetteredChinos
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so we arent talking about the Ginger Ninja then?
Airthrey Capital
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You don't need to learn the formula as such, but you should be aware of the components which are used to calculate option prices.
Basically, factors affecting option pring are....
Price of underlying, strike price, time to expiry, risk-free interest rate, and the "great unknown" - VOLATILITY
Basically, factors affecting option pring are....
Price of underlying, strike price, time to expiry, risk-free interest rate, and the "great unknown" - VOLATILITY
gcb01 said:
if you are serious about trading oiptions then you should know it inside out....you should know all the greek profiles for all stratagies and you should be using this equation (or modified) all the time.......surely you'd want to know the fair value of something before you trade it?
Scholes was one of the founding principles of LTCM. I quote from 'When Genius Failed':
"Indeed, many of Long-Term's trades were attempts to exploit spreads that, in its view, reflected an inaccurate estimate of future volatility risk - the one risk that (to Long-Term) really counted. Such strategies had evolved directly from the Black-Scholes formula."
My comment was flippant, but not completely pointless!!
Black-Scholes assumes constant volatilty and as my old mum used to say, "assumption is the mother of all f**k-ups, son".
"Indeed, many of Long-Term's trades were attempts to exploit spreads that, in its view, reflected an inaccurate estimate of future volatility risk - the one risk that (to Long-Term) really counted. Such strategies had evolved directly from the Black-Scholes formula."
My comment was flippant, but not completely pointless!!
Black-Scholes assumes constant volatilty and as my old mum used to say, "assumption is the mother of all f**k-ups, son".
FetteredChinos
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sidinuk said:
sunday lunch in your house must have been a riot! :cheesy:
