It's back to the BS for us, Black-Scholes to be exact, as we examine the theoretical relationship between volatility and delta and then the practical relationship. Dr. Jim is here to explain it all.
The importance of volatility is a huge part of the tastylive philosophy of trading. We take another look at it here and its impact on delta.
Dr. Schultz began by looking at the Black-Scholes formula for pricing a call option. He explains the relationship of delta to this formula. He went on to display the formula for d1, something he was sure everyone has memorized (not). He focused on a specific part of the formula and explained how it tells us if the call is in or out of the money.
Using the formula, Dr. Jim explained how high volatility impacts both in the money and out of the money options in a way you might not expect. He then provided theoretical examples.
Jim wrapped things up by focusing on the practical applications of what he had just explained. He highlighted the key parts of our tastylive standard operating procedure and then how we can use this new knowledge, hopefully to increase our profitability.
Watch this segment of “From Theory to Practice” with Dr. Jim Schultz to learn about the relationship between volatility and delta, how the two can combine in unexpected ways and the practical applications.
This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.