<p>Sorry, I missed the last question; I think that our posts crossed.</p>
<p>Right now, the october 10 200’s are at 2.68–really low, even considering that they are about one dollar in the money. I entered an analogous trade some time ago, buying June 15 193 calls (at the money at the time) at about 9.30. Obviously, I could close the trade for a significant profit at this point. In addition, as you quite properly observe, a sharp rise in volatility would allow you to profit significantly if you hold long term options and the spy remains steady. However, generally if volatility is rising, spy itself is falling so you would lose money on that end. The calculations are quite complicated and I’m not sure that there is any clear answer to the question of how much leaps would rise if spot volatility rises 10%.</p>
<p>In any event, my intention would be to use this approach not as a trading vehicle per se, but rather as an alternative to pure buy and hold. But if there were a really big upward move in the market, I might reassess and cash out the leap position. However, it could also be used for what would essentially be leveraged short term trades.</p>
<p>^^ As I physicist, I find economists to be charlatans and the nobel prize in economics a total joke. I agree with the guy from SA who said Schiller is ruining his reputation by opening his mouth lately. Please show me how many years before 2008, the cape was as high as today as I’m having difficulty finding a plot that has1 year resolution.</p>
<p>There’s an app for that. At least I have a free “option calculator” installed on my smart phone. </p>
<p>I enter the underlying price, option strike price, days to expiration, interest rate, dividend rate - and then I have the choice of entering the volatility – so I can either work from an option chain and have the calculator show me the volatility, or if I wanted to experiment around with volatility, I could change that number and do a calculation.</p>
<p>So for example if stock XYZ is at $100, and I buy a call, strike 90, which expires in 180 days, assuming 0.4 % interest, 0 dividend, volatility 30%, then it gives me an option value of $14.06. If I saw that those calls were actually priced at $12, my calculator feeds me back a volatility of 20.63%, </p>
<p>But we investors don’t have to stay in the same fund. We can shift things around so that we are mostly invested in whatever seems to be performing the best at the time. </p>
<p>It’s hard to predict the future, but it’s not so hard to make choices based present conditions. For example - we all know that interest rates are at an all time low. They are so low that sooner or later they have to rise. When they do rise, it is going to change the investment landscape. </p>
<p>But interest rates rise and fall gradually, in small increments – so that’s the sort of knowledge we can use to make investment choices. If the rates start trending upwards, then that will be a signal to some investors to shift more of their assets to bond or bond funds. </p>
<p>Doct, darn it. I was looking at this site and it said the aapl implied volatility was 28. I was hoping to use that site. Maybe that was including further out options? </p>
<p>Are you paying for the ivolatilty site and if so, how much?</p>
<p>20 historical… :). The Oct options are 40? </p>
<p>Etrade shows implied volatilities. That is great. I cant remember if Schwab does that. If I dont see the volatility I guess I will call Schwab again. </p>
<p>Schwab is going to let people trade spreads in their iras next year.</p>
<p>Ivolatilty is free? I wonder why I stopped using ivolatilty?</p>
<p>There was one site I was using where the volatilty was off. I cant remember which one. I dont think it was ivolatility that was off. Maybe I stopped using ivolatility because I did not trade for a year. :)</p>
<p>I got a letter from the Franchise Tax Board. They dont have my tax return for 20xx. Since I filed it…</p>
<p>We dont have to talk about the missing tax return. I dont find the missing tax return amusing. :)</p>
<p>Can’t you see that on the option chain from your broker?</p>
<p>If I log into Scottrade and go to the main site (no need to launch an app like Scottrade Elite), then do a search for AAPL and click on the option change, and choose to look at calls only – I see all the greeks and IV numbers. For Sept 12 expiration, at the money is between .44 and .45. (If I look at calls & puts side by side, then I lose the greeks & IV data- but that’s a toggle on/off function for me. ).</p>
<p>Interesting, on Fidelity it has the iv for 30 days which is around 28%. On ivolatility, it shows in the 40’s but of course drops into the 30’s after next week’s announcements. 30 days out on ivolatility is also around 28</p>
<p>It’s just an option chain but it has a lot of choices as to how to look at data, and you don’t have to be logged in to look at it – so it’s generally where I go when i want to check on any sort of option-related info. </p>