John,
Thank you, I always like to associate intangibles (GE, IBM) with tangibles (a pouty tart, Clint Eastwood). It helps the mind to focus.
GE's chart today is ugggggly. We'll see how it closes. I haven't been tracking it but it looks like the best chance to exit was at the open.
I do have a question for people here who know things about options.
BMY is currently sitting with a very high historical volatility (last 30 days, about 74). When I calculate how much BMY LEAPS (of the 04) variety should sell for, I get very high valuations. For example, theoretically, with volatility of 70, the 04 30 calls should sell for about $12.20, but they are at 5.20 X 5.70.
Implied volatility on these options is about 23. So, my question (almost rhetorical by this point) is when market makers price long dated options they must somehow input a "long dated" volatility, but by my calculations they are using the historical low volatilities to do this. Does anyone have some insight into how they price these options long into the future?
TIA,
Kb |
