To be able to calculate the volatility of the spread, we must
equalize the volatilities of the individual options.
First, let’s move the June calls by moving June’s implied
volatility down from 40 to 36, a decrease of four volatility
ticks. Four volatility ticks multiplied by a vega of .05 per
tick gives us a value of $.20. Next we [...]
Posts on ‘March 13th, 2010’
Time / Diagonal Spreads - How to Calculate the Volatility of the Spread
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