Volatility Stress and Options Pricing

Volatility Stress shows markets which have volatility that is out of line with other markets.

With volatility being a key component of options pricing, Volatility Stress attempts to show options prices which may be out of line as well.

Here’s a snapshot from earlier this morning showing Bund Volatility at extremes across most timeframes –

Volatility Stress

The model thinks Bund volatility will fall, meaning an option writer may be able to write options w/ extra premium.

 

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