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chellester,
Volatility is one of the biggest can of worms I've ever come across!
Is it implied, historical, annualized, percent, normalized,
theoretical, yahduh, yahduh, yahduh? The huge differences that you
are experiencing are no surprise to me. Never assume anything! Ask
and see if you get an answer. If that fails you'll have to figure the
method by comparison. You might even try to write the various methods
in an expert commentary which would make it easier to call up the
whole mess at once. In the end, don't give up on volatility. It is
far too important! Just takes a bit to wade through the method to the
madness.
Preston
--- In equismetastock@xxxxxxxxxxxxxxx, "chellester2002" <chelle@xxxx>
wrote:
> Hi, I'm currently reading "Option Volatility and Pricing", by
Sheldon
> Natenberg, and learning about - surprise surprise, option
volatility.
> One of the tactics it's currently talking about is finding
> overprice/underpriced options based on the volatility.
> Using OptionScope, if I input the volatility figure given using the
> option volatility indicator on a given share, and then input the
data
> from actual prices, I'm getting huge differences in volatility,
such
> as a difference of 15, or 20 etc. Now supposedly thats what I'm
> meant to be looking for, but every share/option I've tested this on
> is giving substantial differences. - So - checking the metastock
help
> files for calculating the volatility, it doesn't give information
on
> the formula it uses. I'm assuming that it's using a lognormal
> distribution as described in the book, but it really doesn't say.
Is
> that where my difference might be? I've gone over and over all the
> other figures to input in the OptionScope, and they all seem
correct.
> Either I'm making errors somewhere, the whole market is mispriced
> (according to the theoretic price), or figures I'm using for
> volatility must be wrong.
> Has anyone come across this? Anyone have ideas?
> Thanks
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