Volatility skew tells us that options with the same maturity at different strikes can have opton implied vol. Often option prices seem to have a life of their own even when markets move as anticipated. A closer look, however, reveals that a change in implied volatility is usually the culprit.TUTORIAL: Options BasicsWhile knowing the effect volatility has on option price behavior can help cushion against losses, it can also add a nice bonus to trades that are winning.
The trick is to understand the price-volatility dynamic - the historical relationship between directional cll of the underlying and directional changes in volatilityThis article needs additional put and call option volatility world for verification. Please help improve this article by adding citations to reliable sources.
We propose a new bivariate mixture multiplicative error model and show that it is a good fit to Nikkei 225 index call and put option implied volatility (IV). A good model fit requires two mixture components in the model, allowing for different mean equations and error distributions for calmer and more volatile days. Forecast evaluation indicates that in addition to jointly modeling the time series of call and put IV, cross effects should be added to the model: put-side implied volatility helps forecast call-side IV, and vice versa.
Impulse response functions show that the IV derived from put options recovers faster from shocks, and the effect of shocks lasts for up to six weeks.Suggested Citatio.
And put call world option volatility