Re: [TheOptionClub.com] IV/VIX question

 

Esa, I have been stating this for many months now - with no others in agreement. But you just said it, basically. I dont know who you are - maybe a market maker?? But if I read this right, you are saying that the greeks do "NOT" account for 100% of an options change in price. I once gave the extra influence the name ether, but I assume that the price is also affected by supply and demand, bid / ask spread, lack of liquidity, etc. Can you answer the question for us? "What drives the price of an option?" And how much of the option price is accounted by the greeks? Thanks,  Ross It's called supply and demand. The demand for the near term puts is greater than the demand for the far term puts. If the market comes to believe that we will be moving into a higher volatility environment, then the back month puts will start getting pumped up. Remember, the implied volatility of an option is backed out from the price of an option. What drives the price of an option? For this reason, back month options don't get pumped up like front month options normally do at earnings because the market believes that the volatility will dissipate after earnings come out. So the question is whether or not the market believes that the higher implied volatility is here to stay or not. The answer lies in the price of the options in the back months. Cheers ------------------------------------ The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source. To unsubscribe from TheOptionClub, send an email to: OptionClub-unsubscribe@yahoogroups.comYahoo! Groups Links <*> To visit your group on the web, go to:     http://groups.yahoo.com/group/OptionClub/ <*> Your email settings:     Individual Email | Traditional <*> To change settings online go to:     http://groups.yahoo.com/group/OptionClub/join     (Yahoo! ID required) <*> To change settings via email:     OptionClub-digest@yahoogroups.com     OptionClub-fullfeatured@yahoogroups.com <*> To unsubscribe from this group, send an email to:     OptionClub-unsubscribe@yahoogroups.com <*> Your use of Yahoo! Groups is subject to:     http://docs.yahoo.com/info/terms/

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The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

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