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And what would that mean as to the share price predicted movement?

2007-10-17 02:48:05 · 1 answers · asked by Anonymous in Business & Finance Investing

1 answers

You would consider an option overpriced if the implied volatility of the option is greater than the volatility you expect the underlying to experience prior to expiration of the option.

Different people determine what volatility they expect from the underlying differently. Many people compare implied volatility to historical volatility. Most people look at what known events will occur, such as earnings announcements, new products to be announced, regulatory approvals, etc.

2007-10-17 06:07:30 · answer #1 · answered by zman492 7 · 2 0

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