Questions tagged [options]

A contract that gives the owner the right, but not the obligation, to buy or sell a security at a fixed price in the future.

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1 answer
66 views

Option Extrinsic value representation

The typical representation of the extrinsic value of an option is the following: Is the gaussian the real representation of extrinsic value derived from Black and Scholes? Should it be lognormal? ...
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0 answers
3 views

Options market: quote-driven or order-driven?

In my understanding: bonds, currencies, and commodities (cash, not derivatives) are traded in a quote driven market with a market maker who "will either fill your order from its inventory or ...
3 votes
0 answers
82 views

How an Option market-makers make money?

This might be a very broad question, but I would like if someone can please explain to me how a market makers make money in Options market ? Thank you
2 votes
0 answers
50 views

B&S pricing of option with convex transformation

Assuming B&S world, is it possible to price an (European) option on a general transformation $f(\cdot)$ of $X$? What kind of assumptions should we make on $f$? Is convexity sufficient to find some ...
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0 answers
20 views

Modelling forward and correlation dynamics for options on the best-of multiple commodity spreads

I am looking at best-of options on futures (commodities), let's take for example the following payoff specification: $ max(a_{1}-c_{1}, \ a_{2}-c_{1}, \ a_{3}-c_{1}, \ b_{1}-c_{1}, \ b_{2}-c_{1}, \ ...
-1 votes
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Best approach to select strike prices for an Iron Condor?

Options beginner here. I'm aware of three popular ways to select strike prices for Iron Condor. Select strikes such that they are equidistant from the CMP. Select strikes such that the they form a ...
-1 votes
0 answers
80 views

Does the usual theory (e.g. Black-Scholes) make sense for FX options?

When you open any book about option pricing theory, you have this kind of setting: A risky asset whose value at time $t$ is $S_t$. A risk-free asset whose value at time $t$ is $S^0_t$. A portfolio ...
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0 answers
43 views

Weekly S&P500 options price data

I cannot find free data on S&P500 options price, call and put, at different strikes of weekly options, on a daily basis, with maximum and minimum prices. I would like to have this data to study it....
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0 answers
29 views

Options Market making, what to do with ITM options

I am a option market maker. Say at some point in the time, I end up having only but ITM options in my portfolio and I want to reduce my risk exposure ( delta, Vega, gamma), what can I do to make ...
1 vote
1 answer
75 views

The option is "purer" in its risk---what is meant by this?

In the book "The Concepts and Practice of Mathematical Finance" author M. Joshi writes on page 12 the following: "From the point of view of risk, we can regard an option as an attempt ...
7 votes
1 answer
344 views

implied volatility and strike price

Assume for simplicity that the expiration time of an option is $1$ the initial stock price is $1$ and there is no dividend yield and the risk free return is $0$. How is it possible to show that the ...
1 vote
1 answer
213 views

How to understand broken wing butterfly option strategies?

I feel very confused about the greeks analysis for the broken wing butterfly strategy. Let's say for the stock ABC, we enter into a such strategy: we long a put option with strike $k_1$ and another ...
23 votes
6 answers
28k views

What is the implied volatility skew?

I often hear people talking about the skew of the volatility surface, model, etc... but it appears to me that a clear standard definition is not unanimously in place among practitioners. So here is ...
1 vote
1 answer
104 views

Is float32 enough for option pricing?

Most quantitate libraries use float64 precision for monte-carlo or other method. Some academic papers do experiments on float16 and find it has some restrictions on float16. I just wondering if ...
2 votes
0 answers
116 views

Pricing Options on Inefficient/Illiquid Assets

I'm currently trying to gather more information on option pricing in very inefficient markets for the underlying. By inefficient, I mean markets with consequential bid-ask spreads (5% or more) and ...
-1 votes
1 answer
75 views

What do "heating degree day" prices actually measure?

The futures for Dallas Heating Degree days for July 2022 are trading around 6.83 But Dallas is hot in July and does not typically get any heating degree days So, what does the 6.83 for July 2022 ...
4 votes
1 answer
459 views

Expected Delta hedging frequency as function of implied (and realized) volatility

I'm looking for a proxy (or some rule of thumb) that can create a link between the implied volatility, the realized volatility and the frequency of Delta hedging required to keep the Delta as close as ...
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0 answers
46 views

Option's Delta Investopedia Question

New to this. In this Investopedia article on Delta the following looks like a typo - How Do Options Traders Use Delta? Delta is used by options traders in several ways. First, it tells them their ...
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25 views

When is the gamma of an iron butterfly spread positive? (Assuming stock price at t=0 is equal to the highest strike price)

I know the Gamma of a butterfly using calls is $$\Gamma_{butterfly} = \Gamma_{C_{K_3}}-2\Gamma_{C_{K_3}}+\Gamma_{C_{K_3}}$$ Where K3-K2 are the same as K2-K1 and S=K1, But under what condition is the ...
1 vote
1 answer
101 views

Payoff of a Butterfly spread under risk neutral measure is always positive for any t<T

In a situation where $$K_3-K_2=K_2-K_1=h>0$$ and $$K_1\le S_t\le K_3$$ where $$S_T=S_t.e^{[(r-\sigma^2/2)(T-t)+\sigma(W_T-W_t)]}$$ (i.e. Stock process follows GBM under the risk neutral measure). I ...
2 votes
1 answer
405 views

Exercise Probabilities Vanilla Cap/Floor

When looking at the discounted pay-off formulas of a vanilla caplet and a vanilla floorlet $\frac{\Delta\tau}{1+r_k\Delta\tau}\max(r_k-r_{cap},0)$ $\frac{\Delta\tau}{1+r_k\Delta\tau}\max(r_{floor}-...
14 votes
3 answers
8k views

What really is Gamma scalping?

How does Gamma scalping really work? It seems there is no true profit scalped. If we look at the simplest scenario, Black-Scholes option price $V(t,S)$ at time $t$ and the underlying stock price at $S$...
2 votes
0 answers
28 views

Do you roll back the maturities and schedules when backtesting VaR for portfolios of bonds, options or future contracts?

I want to backtest VaR models which are applied to portfolios of products which have maturities (options and futures) and even schedules (bonds). I have a question which never came up when backtesting ...
10 votes
1 answer
1k views

Risk management tools for long term Gamma/Vega sellers subject to margin calls

TL;DR: if you're a retail investor and you systematically sell long-term vertical spreads while staying Delta-neutral, your main risk comes from Vega and the Gamma of opening gaps that can throw you ...
1 vote
1 answer
34 views

Finding optimal option to maximise gains under given price hypothesis

Let's have Stock S at \$100 on January and my hypothesis is S will be trading at \$150 in July. Is there any Python/R package that I can feed with option prices from my broker and it would return the ...
4 votes
3 answers
7k views

Daily option data

I am wondering where I can pull daily (hourly, by-the-minute, etc. even better) option data for a particular underlying. I would prefer a database I could scrape through and API, but would not mind ...
0 votes
2 answers
123 views

What does this options' data mean?

I've got myself some data on SPX optons which looks like this: ...
3 votes
1 answer
414 views

Data sources for historical Eurex settlement option prices

I am looking for long history for historical settlement option prices at EUREX. This seems to be more challenge than I could imagine. Eurex themselves doesn't offer that data unfortunately (they only ...
18 votes
1 answer
14k views

What is the best live options data API?

What is the best/cheapest service to get real-time (as real-time as you can get) on stock options? I'm looking for the fastest update on the ENTIRE market, with a few stocks prioritized, so I need ...
3 votes
2 answers
949 views

asian option – exotic option – real data, authentic examples?

I would be pleased if any of You can give me the real example of an asian option (or other exotic option) that is being traded or that is offered by some institution. I have been searching the whole ...
1 vote
2 answers
945 views

CME historical option data provider

Is there any other historical end-of-day CME option data provider rather then CME DataMine? I've searched all the internet and found only CBOE traded options.
1 vote
0 answers
31 views

Where to Find Foreign Countries Index Option Data

OptionMetrics database contains option data for several US indexes (SP500, SP100...). But I don't see any option data for foreign indexes. Is there a place from which I could get/purchase the options ...
0 votes
1 answer
167 views

Historical Options data

Are there any good sources where I can obtain daily historical options data (strike price, expiration dates, bid/ask spread, etc). I understand that this type of data is very hard to come by and ...
2 votes
0 answers
324 views

commodity futures options data

I am trying to get my hands on some historical commodity futures options data for about 35 commodity futures. So far in my search the only way I can get the data seems to be through the Commodity ...
0 votes
2 answers
3k views

Where can I find best end of day option data? [duplicate]

Looking for accurate end of day option data. Preferably with Greeks. Any recommendations?
2 votes
3 answers
538 views

Options Data Sources

I am using Option Metrics to study a couple of things related to options. However, Option Metrics is quite limited in terms of scope (mainly it's US equities). I was wondering two things: 1) Are ...
1 vote
0 answers
111 views

Historical options data for FX/FI

I know that my question is quite large and that quite a lot of questions already deal with the options data. However most of questions deal with options on American equity markets. Could you ...
2 votes
1 answer
362 views

Old CBOE SPX options data: listing and expdate issue

I can't figure out the logic behind SPX option data for 2008-2009 years. First, all traditional SPX options have exp_date on the third Saturday of each month. How can it be? Why not Friday? Second, ...
2 votes
1 answer
820 views

SPX options data from the CBOE data shop

I would like to explore some listed options trade ideas on the SPX (and maybe later on its components too), and naturally I would need historical data to backtest those ideas. In my quest for a ...
1 vote
1 answer
490 views

Historical S&P 500 OPTION data on WRDS, no access to Option Metrics

I'm looking for historical data of S&P500 options. I have access to Wharton Research Data Services (WRDS), however, my university does not provide access to Option Metrics. Is there another way ...
2 votes
0 answers
46 views

Where could I get European non-dividend option data

I am pretty new to option pricing. I got a task asking me to price a stock option, which should be an European non-dividend option, and compare my price to its quote. I used to use TSLA data ...
0 votes
0 answers
111 views

Reputable source for historical US-listed EOD options data for backtesting

I've gone through the data thread and found a few viable options. ivolatility.com in particular has what I'm looking for (EOD US-listed NBBO options price data, volume, OI, history back to 2000) but ...
1 vote
0 answers
47 views

Data for Japanese options

I'm working on an academic project that requires data for options tracking ~300 large Japanese stocks between 2010$-$2020. The standard data source I've seen quoted in academic papers is OptionMetrics,...
0 votes
0 answers
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US stock options data with resolution less 1 min

I'm looking for data (with a delay, but ideally with a real-time option) of the prices of options on US stocks with resolution less 1 min (1-5 sec). With a reasonable price for a pet project - I have ...
0 votes
0 answers
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Pricing any Payoff structure using Binomial Tree(Pricing DDTPS)

I just wanted to confirm if its theoretically possible to value any derivative with a payoff that can be replicated by a portfolio of options,underlying and bonds. I wanted to value DDTPS which is a ...
1 vote
2 answers
330 views

Pricing binary options

A binary option pays an amount of money if an event takes place and zero otherwise. Binary options are usually used to insure portfolios against large drops in the stock market. On March 25, 2021 the ...
3 votes
1 answer
209 views

What is gamma to do with realized volatility?

I keep hearing that gamma is a bet on realized volatility. That is, if we are long gamma then we need higher realized volatility to come in the future in order to make a profit. from other source: If ...
0 votes
0 answers
21 views

How to compute the price range for an American call and put option?

A non dividend paying stock has the following details for its European option: Time to expiry – 1 year, Risk free interest (Continuous)- 5%, Exercise price = 42, Current Stock Price = 40, Call option=...
1 vote
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What is the optimal time for exercising American call and put option?

A 9 month American option (underlying) is known to pay dividend of USD 1 and USD 0.75 at the end of the ...
3 votes
1 answer
333 views

GARCH(1,1)-M MLE optimization with fmincon in R

I've searched thru dozens of papers and did not find in any of them satisfying and enough theoretical answers to my concerns. So I've combined everything what I found below. Please indicate if my ...

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