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There are a couple of issues with your example. First, for this ticker, there is a problem with the Yahoo price data for the period 2014-11-26 through 2014-12-03 in which the prices drop about 80% and then return to their trend line. This appears to be related to a stock split which Yahoo isn't handling properly and isn't real. Its causing part of your ...


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You need to see the deals on these options and/or have deep knowledge of how these prices are marked to be able to have a better model. First thing first, I believe that the prices that you see are usually either "marked" (set) by one or several treaders, or they are the prices on last transaction before the close of the market/first transaction of the day ...


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The only correct way is using log returns. To keep everything consistent, take a arithmetic mean of log returns. Then calculate it net of the risk free (how do you subtract properly using geometric returns?). Then divide (how do you do this properly using geometric returns?) by the standard deviation (how would you calculate this properly with geometric ...



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