I am calculating IV for intraday options and sometimes I am getting the value as "0"? Is that possible? For example:

  • Strike = 26700 PE
  • Fut = 26962.55
  • Spot = 26902.55,
  • TimeToExpiry = 797340sec.
  • Price = 190.05

For this I am getting IV as "0" using MibianLib. Calculations are done in Python.

  • 4
    $\begingroup$ If the underlying is 26902 and the strike is 26700, the option must have an intrinsic value of 202. The market price 190.05 is (slightly) below this which is theoretically impossible. There is no possible IV which is compatible with this (volatility raises the option value above 202, it cannot make it lower). Therefore a a courtesy to you the code is returning IV of zero to let you know something is wrong. (What is wrong is probably that some of the data you are using is stale, i.e. the 190.05 was observed some time ago, it is no longer valid now the the spot price has gone up to 26902). $\endgroup$ – Alex C Apr 8 at 13:33
  • $\begingroup$ @AlexC is right if it's a call option. Maybe I missed something but I don't see any information about the option whether it is put or call. Anyway, as described, the IV of 0 gives a hint that something is wrong, maybe a stale price or maybe the wrong type chosen, i.e. it is a put option and you are calculating based on calls. $\endgroup$ – Fokko Apr 9 at 10:45

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