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1. Find a relatively heavily traded stock (high volume) that has options available. You can find these on Yahool Finance 2. Find a call and
1. Find a relatively heavily traded stock (high volume) that has options available. You can find these on Yahool Finance 2. Find a call and a put that expires around the end of December (Dec. 31 should be available) AND that have exercise prices close to the current stock price. Higher or lower doesn't matter, just close. 3. Calculate the value of the call and put using the Black-Scholes method (using Excel) and assuming the annual volatility is 20%. 4. Now use the market price of the call and put to estimate the implied volatility (you need to use Goal Seek for this) of each option. 5. Report the results from #3 & #4. What trades are suggested by your results (e.g. should you buy/write either option?) 1. Find a relatively heavily traded stock (high volume) that has options available. You can find these on Yahool Finance 2. Find a call and a put that expires around the end of December (Dec. 31 should be available) AND that have exercise prices close to the current stock price. Higher or lower doesn't matter, just close. 3. Calculate the value of the call and put using the Black-Scholes method (using Excel) and assuming the annual volatility is 20%. 4. Now use the market price of the call and put to estimate the implied volatility (you need to use Goal Seek for this) of each option. 5. Report the results from #3 & #4. What trades are suggested by your results (e.g. should you buy/write either option?)
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