According to MCMILLAN ON OPTIONS, implied volatility always drives options prices higher. He doesn't even list supply and demand as a factor influencing option prices. But let's say the VIX index is at 10, and we know that the index rarely goes below 10 and rarely stays at 10 for long. Supply and demand will drive up the price of long VIX calls and drive DOWN the price of short VIX puts. Implied volatility, in this case, would make PUT prices LOWER, not higher. Implied volatility obviously drives supply and demand, but it can make prices higher or lower (contrary to what the options expert McMillan says), depending upon whether there is more (or less) upside potential in comparison to downside potential. Am I getting this right or not? Is this so obvious that McMillan doesn't even mention it? Or am I missing something?
2007-12-13
06:54:39
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3 answers
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asked by
Yardbird
5
in
Investing