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What is gamma to do with realized volatility?

I like to think about this problem graphically. The pic below shows a call option value at some point before expiry as a function of the underlying. At the expense of stating an obvious fact, we note ...
• 4,961

Does it matter that Bachelier IV differs from BS IV for a given option price?

Neither of them is correct or incorrect, these are just two different numerical inputs that one should plug-in into two different formulas to get the market price of an option given all other ...
• 301

Is float32 enough for option pricing?

Usually float32 is enough For most applications in finance, float32 is plenty of precision. This is generally suitable for ...
• 1,359

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

Note that \begin{align*} K_2 = \frac{K_1+K_3}{2}. \end{align*} Then \begin{align*} &\ \max(S_T-K_1, \, 0) + \max(S_T-K_3, \, 0) \\ =&\ \max\big(S_T-K_1 + \max(S_T-K_3, \, 0), \, \max(S_T-K_3, \...
• 20.4k

Finding optimal option to maximise gains under given price hypothesis

I do not know of any package that can solve your problem; but it seems to be a simple problem, in the end: Given a 'future target price' $S^*$ (say 150 in your case) and a set of call options with ...
• 5,368
Accepted

Negative-gamma delta hedging (for a call option writer): how will the stock price affect the portfolio profit?

Yes the p/l profile is the reflection of the yellow line so it appears that the option writer always loses money. However the option writer benefits from time decay, denoted by the Greek letter theta....
• 13.7k

What do "heating degree day" prices actually measure?

Are you sure these futures are trading? There is no data on BBG - or the CME. I have no experience with these products, but I am almost certain that there are no quotes (and hence no trading) for July ...
• 4,208
1 vote

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

Agreed with @nbbo2, "purer" in this context means "more concentrated", that's why Mark Joshi then draws the parallel with a "concentrated acid". Imagine a stock trades at ...
• 4,961
1 vote

Deriving strike from Delta

You should use whatever volatility was used to calculate that delta. However, you probably don't know that since delta is an output, not an input, to option pricing models. If you are getting Delta ...
• 1,073
1 vote

implied volatility and strike price

Notations: $T,K$ are the maturity and the strike of a vanilla call of price $C(T, K)$. $(S_t)_{t\in [0,T]}$ the price process of the underlying. $\mathbb{Q}$ is the risk neutral measure. \$x(T,K) = ...

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