Implied Volatility

[cadeac]

Hi all,

I was comparing the value of Implied volatility between several software including IB and eSignal, just to realize that values may be completely different.

I understand that this calculation is not straightforward (although I guess all use a black-scholes models), but there are sometimes over 10% difference.

In general, do you think that eSignal values for implied volatility make sense ?

Regards

[eSignal_Brent]

Underlying's IV

Hey Cadeac,

Thanks for posting!

Not sure what method IB uses, but we use Black-Scholes . . . and our method to calculate the underlying's IV uses a weighted average of the 2 near-term, closest at-the-moneys' IVs.

We chose that method after researching the various methods and advice from consultants . . . and seemed to be the most generally accepted in the industry.

We could explain any varience if we knew what method other sources (IB, other software, etc.) used . . . some of the inputs/calc's contributing to variences between sources could be whether expiration weighting was used, and if, what percent, which expirations, how many strikes are used . . . options'/underlying prices used could be last, bid/ask avg, the risk-free rate used, etc..

Very appreciate your feedback, hope that answered your question!

Brent

[cadeac]

Hi Brent, thanks for that.

Actually I was talking about the implied volatility calculated for individual options, particularly for Globex currencies.

Let me give you an example:

At 3:28 AM for 6A U9P825, this option has been traded in the last hour and implied vol calculated by other software is 24%, which makes sense regarding the current market conditions.

However eSignal return an implied volatility of 6%, and other in the money put options have a nil implied volatility, which seems a bit odd.

As far as I can tell, I have similar results for most underlying on CME-Globex.

I guess you use Black-Scholes even for American style options, but since the underlying is a Future that should not make such a huge difference.

Do you have any idea about that?

Thanks

[eSignal_Brent]

Hi Cadeac,

Thanks again you for your post.

Your observation's been reported to product management, who's investigating the issue with QA & engineering. They'll be making any necessary changes based on their findings.

Again, thank you for the feedback!

Brent

[thinkingfield]

any updates on this?!

hi, i am checking the IV of crude oil options (CME NYMEX) and they are WAY WAY off. where are they calculating from?

also, since this is not working correctly, is there any way of exporting the option data to excel either dynamic or static?

thanks