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When these market vol figures are used in an option pricing model trader gets the bid and ask prices fort he european vanilla options as in the above example. Okay, so how can one get from the delta to the strike price?

Delta is highest deep in the money and close to expiration, and lowest deep OTM and close to expiration. Gamma is highest ATM and at expiration. Skip to main content. Be prepared with Kaplan Schweser. Found this on Pg of my Currency Risk Mgmt reading - it was in Book 5 - but should be part of a different volume - and considering the reading has not changed the same should be present in your reading as well Quote:.

Oct 7th, I swear I just read that a currency overlay portfolio was like a farmyard. Jones May 15th, 3: Victoryeo May 16th, 6: Flashback May 16th, 6: I do not ask for the trust nor give it to you. Smagician Jun 5th, 1: Where is it flatter lower delta?

Where is it steeper higher delta? Simplify the complicated side; don't complify the simplicated side. Hello magician, Thanks for your insightful cues. Medusa Jun 5th, 8: Higher volatility options have less chance of ending up in the money at expiration.

Instead of hedging with the underlying contract, lower deltas can be offset by selling other options against The question may be motivated by the way closing implied volatilities are reported for LME traded third wednesday prompt metals contracts.

LME metals futures are really forward contracts with constant maturity forwards being electronically quoted for various terms e. In other words, an option that's 25 points out of the money I'm assuming these are calls.

Quoting option prices this way is much more stable. The price of an option on X with a fixed strike price varies as X's price varies. Similarly, option volatility follows a "V" pattern when plotted against strike price the "volatility smile" , with the lowest volatility when the strike price is equal to the current price. Therefore, you only need 4 volatilitys 2 on each side of the current price to obtain the volatility-vs-strike-price graph.

I'm not sure why they give you 5 and why the 5th one isn't zero delta. However, if the strike is close to the current price, these two numbers are nearly equal.

Here's a good link with exact formula - http: And here's and article with same formulas - http: By clicking "Post Your Answer", you acknowledge that you have read our updated terms of service , privacy policy and cookie policy , and that your continued use of the website is subject to these policies. Home Questions Tags Users Unanswered. For example for March Zinc options I might see 5 quotes available for deltas as follows: Quoting delta-vol-term is standard on FX.

You can then construct all vol surfaces from it, as well as convert it to strike-term vol surface. Richard Herron 3, 1 14 Okay, so how can one get from the delta to the strike price? I always get it from my data provider, who calculates the Greeks from a volatility surface. You shouldn't have to or want to find delta yourself. No, I mean how can I calculate the strike price from the given delta if that is possible? Your data provider should give you strike, also.

At least if you're paying them money. What kind of option is this? I am not familiar with zinc march It's Zinc on the London Metals Exchange: I handle volatility curves where moneyness is quoted in delta by an iterative guess: Use an initial guess for delta of 0.

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