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Strategies & Market Trends : Selling Puts: Have Cash Will Travel -- Ignore unavailable to you. Want to Upgrade?

To: taxman who wrote (929)1/23/2000 11:07:00 PM
From: Tom K.  Read Replies (1) | Respond to of 1235
 
...the implied volatility on an option moves up and down depending on supply and demand, in my opinion....

You may be correct, however my understanding is that the price of the option reflects the perceived volatility of the underlying, not the supply and demand of the option.

Tom



To: taxman who wrote (929)1/23/2000 11:10:00 PM
From: OX  Read Replies (2) | Respond to of 1235
 
>>>what the implied volatility should be is subjective

while it's true that IV is set subjectively, it does have to fall inline w/ the surrounding strikes and also corresponding Call (or Put). otherwise there are arb opps there. at least that's the way I understand it to work in theory. for options on very liquid stocks like DELL, I don't think you'll see abnormal volatility skewing for very long.


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