Options 201: Beyond Obi-Wan-Kenobe Message Board

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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe

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To: OX who wrote (759)	2/23/2003 4:25:54 PM
From: tyc:>	Read Replies (2) of 1064

A delight to talk to you again ! And yet a 22% volatility input gives option values that extend 2 SD's above and 2sd's below the MA (with the strike the MA and the option at-the-money)..... in other words coinciding with the BB range. Doesn't that "prove" that 22 % is correct? It seems to serve my purpose. The stock moves from ~ 2 points below the mean to ~2 points above the mean (~20-25as you say). Standard deviation measures deviations from the mean, so the relevant range is ~ 2 (or 10%) rather than ~ 4 (or25%). I use 2 standard deviations because my understanding is the BS formula uses 2 SD's. I use a Qbasic program i wrote to calculate option values. It also indicates 2 SD ranges above and below the current price. So I am only being consistent using 2sd BB's. Everything seems to Gybe. Unfortunately I don't have MacMillan having loaned out my copy about 20years ago ! Do you remember my "trading ranges" and the book by Richard Croft I mentioned to you ? I got the "sqr(252/days)" to annualise from it. But not absolutely sure of my ground except to say again, it seems to work.

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