Options Message Board - Msg: 12801191

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Strategies & Market Trends : Options

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To: Bridge Player who wrote (2344)	2/7/2000 4:52:00 PM
From: edamo	Read Replies (3) of 8096

bridge player....amazing that you only can grasp the definition that backs you up....try to find the definitions for both "historical volatility" and "implied volatility". if you think that these are a component of time value, then you are grossly incorrect. look at black scholes, and after you do you hopefully will understand what the wild card is in options pricing... basic question, if all is left but time value in an otm, then how does the contract price ever increase in value???? can't increase the time to expiration, can you?....does it lay fallow until atm or itm???? so perhaps it may have something to do with the "share price", historical volatility" and "implied volatility"? you may find it boring, but others may grasp how an option regardless of relation to strike is priced.

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