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Last time I checked, one of the major factors in the Black-Scholes formula
is
the historical volatility of the underlying. So are we getting any closer
to a
leading indicator? The price and the supply/demand status at this present
moment is as close as you can get.
-----Original Message-----
From: Richard <rjb@xxxxxxxxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Sunday, August 02, 1998 12:21 PM
Subject: Re: Day trading futures options.
>>I seems to me that Implied Volatility lags Historical
>>Volatility in most time frames. I have no proof but it seems that way to
>>me.
>
>That is not entirely true. I don't want to get into this "leading/lagging"
>thing all over again but historical volatility by definition lags, because
>you must use history in order to calculate it. What's more, the time frame
>you use to calculate historical volatility makes a big difference in the
>results you get. Are you using 10 days, 100 days, 10 years, 100 years?
>
>But implied volatility is a figure that exists in option prices RIGHT NOW.
>No historical volatility data is used to calculate it. It is the end result
>of solving the theoretical option pricing model for "V" (volatility) rather
>than "P" (price).
>
>If you're using the Black Sholes Model, for every given option at any one
>given time, there IS ONLY ONE figure for implied volatility. There is no
>argument or discussion about it, whereby 100 different traders will have
>100 different opinions on historical volatility given the various time
>frames they may use.
>
>
>
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