Timeline for Implied volatilities for different options that track the same stock
Current License: CC BY-SA 4.0
13 events
| when toggle format | what | by | license | comment | |
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| Dec 8 at 1:43 | history | edited | AKdemy |
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| Feb 5, 2022 at 19:26 | vote | accept | lithium123 | ||
| Feb 2, 2022 at 22:04 | answer | added | AKdemy | timeline score: 2 | |
| Feb 1, 2022 at 22:02 | comment | added | Dimitri Vulis | @lithium123 before the stock market crash in October 1987, the volatility surface did not have much skew (smile/smirk). However, after the crash, investors simply began to feel that losing money is more painful than gaining the same amount of money is enjoyable, leading to the "asymmetric volatility phenomenon" (Google it). Here is one nice paper discussing the history of the skew - there are many others. | |
| Feb 1, 2022 at 21:05 | comment | added | lithium123 | @DimitriVulis Can you elaborate more on why/how different moneyness leads to different implied volatilities? castella08 outlined one reason below, but I'm interested if there are others. | |
| Feb 1, 2022 at 21:02 | vote | accept | lithium123 | ||
| Feb 5, 2022 at 19:26 | |||||
| Feb 1, 2022 at 19:48 | comment | added | user34971 | If all options had the same implied volatility that would mean that the volatility of the stock is constant. This is not the case as numerous empirical studies have confirmed. The volatility of the stock depends on many factors such as news, sentiment, macro and micro drivers, market activity etc. A non-constant (i.e. unpredictable) volatility for the stock leads at the very least to a vol term structure and a smile/skew. | |
| Feb 1, 2022 at 16:35 | comment | added | Dimitri Vulis | stock options have volatility surfaces; If the underlyings are swaps rather than stocks, then the volatility cube has dimensions: moneyness, time to option's expiry, time to underlying swap's maturity. | |
| Feb 1, 2022 at 12:56 | comment | added | Kermittfrog | For a given underlying and option type, implied volatility is indexed (and quoted) by time to maturity TTM and strike / moneyness M (as @DimitriVulis pointed out); at least in the stock / index option space that you asked about. | |
| Feb 1, 2022 at 12:53 | answer | added | KT8 | timeline score: 1 | |
| Feb 1, 2022 at 12:50 | comment | added | Dimitri Vulis | They moneyness of the option - a way out of the money put might be very different from an in the money call. | |
| Feb 1, 2022 at 12:02 | answer | added | Bikenfly | timeline score: 1 | |
| Feb 1, 2022 at 2:51 | history | asked | lithium123 | CC BY-SA 4.0 |