Black and Scholes Options Evaluation Message Board

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Strategies & Market Trends : Black and Scholes Options Evaluation

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To: Uri Miller who wrote (16)	12/11/1996 8:02:00 PM
From: John Kinder	of 44

Thats what computers are for. Let them add the numbers and divide for you! What you want to do, however, is avoid doing this altogether. You want to find the "implied volatility" and use that number. Plug in the current option prices for several options (different expiration dates & strike prices) on the same stock, and work the BS formula backwards to find the volatility/deviation needed to balance the equation. An efficient market fairly values options, so unless your trying to find some small pricing disparity to take advantage of (arbitrage), this will be close enough.

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