Do what?
An option contract only covers the underlying, the strike price and the expiration date. It has nothing to do w/pricing!!!
Exchange regulations require market makers to maintain an orderly price structure.
From: OptionClub@yahoogro
Sent: Wednesday, October 21, 2009 8:31 AM
To: OptionClub@yahoogro
Subject: [SPAM] RE: [TheOptionClub.
Jack
Each option is a Contract, Contractually that must follow Standard Accepted Pricing methods,
Which all include Volatility
Noel
From: OptionClub@yahoogro
Sent: Wednesday, October 21, 2009 7:05 AM
To: OptionClub@yahoogro
Subject: RE: [TheOptionClub.
A lot of people think that options are priced based on volatility. I think options are priced by investors/traders – volatility is just a measure of where options are priced right now. It is useful for comparing options on different underlying and may help in predicting where pricing will go in the future but not very useful in pricing and option.
It is a question of causality. Do prices cause volatility or does volatility cause pricing? Or is pricing affected by other factors which cause both pricing and volatility?
From: OptionClub@yahoogro
Sent: Wednesday, October 21, 2009 5:37 AM
To: OptionClub@yahoogro
Subject: [TheOptionClub.
Noel,
Theoretical price is derived from an options pricing formula such as the
Black-Scholes formula. The reason you saw such a swing in the price of
those options is because the option premiums had inflated due to the
uncertainty surrounding AAPL's impending earnings release. This
represented an increase in implie volatility. Once earnings were
released, the uncertainty was removed and implied volatility fell. This
phenomenon has been described as an IV collapse.
The reality is that there was no deviation from the theoretical price
and the actual price. It's just that at that particular moment the IV
figure being used to calculate theoretical price was no longer in step
with the market.
Christopher Smith
TheOptionClub.
--- In OptionClub@yahoogro
>
> Did anyone think it was strange that Between yesterday and today and
now,, the AAPL Call and most put Options were over 100% less than their
theoretical value, Someone explain please
>
> I had one that theoretically it should have been $3.90 and it hit a
high of 1.60 for a split second at the opening and has been totally
wrong ever since and after looking at all of the NOV chain its all wrong
>
> What the Hell!
>
> Noel
>
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