SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Option Spreads, Credit my Debit
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: jjs_ynot who wrote (1597)8/24/2000 11:24:42 PM
From: KFE  Read Replies (2) of 2317
 
Dave,

I programmed Black-Scholes into a spreadsheet

Your computer skills are better than mine, I have to do it the old fashion way.

I have been playing some ratio writes and ratio spreads today to take advantage of Implied Volatility disparities across strike prices.

Volatility Skews-it sounds like you are trying to trade like an option market maker. I don't know how practical this is for the retail investor. We are talking very advanced stuff here and we don't want to turn people off so I will just give a few thoughts.

If the BSM model was truly efficient there would not be any skew.

As you know OTM options are usually overpriced relative to ATM options causing a positive skew.

An important thing to remember about vertical spreads is that they are subject to skew risk.

Ratio spreads and skew: When skew is flat it is better to be long ratio spreads(backspreads).

Remember that index options are not generally subject to underlying arbitrage and therefore can have a negative call skew.

Option market makers are not really interested in the theoretical value of an option but they due use skews to determine which options are overpriced relative to each other under the same pricing model.

Regards,

Ken
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News