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by hgibbs 1836 days ago
But how do we get the prices? If I tell you the at-the-money front-month call is $1000 will you tell me the vol is 100pa?
1 comments

Yeah, basically. Also need the strike, spot, an estimate of the risk free rate (probably not today).

The implied vol is a useful way to make sense of the actual market prices of options. We also might have some predictions about the market's implied vol changing going forward and we can reverse those errors back into expected price changes (and maybe trade on them).