Institutional Options Trading

Options VS Delta-One

What is implied volatility and why is it so important?

  1. An option expiring in 175 days with a strike price of 25,000 trading for $36.60 OR
  2. An option expiring in 14 days with a strike price of 4,000 trading for $154.30
  1. Assume we are pricing a call with $100 strike that expires tomorrow.
  2. Assume the underlying asset has a 20% chance of being worth any 5 prices tomorrow: $60, $80, $100, $120, $140
  3. What value can the option be worth at expiration, respectively? $0, $0, $0, $20, $40?
  4. Given these outcomes, the price of the option today has an expected value (aka the probability weighted value)
  1. Assume we are pricing a call with $100 strike that expires tomorrow.
  2. Assume the underlying asset has a 20% chance of being worth any 5 prices tomorrow: $0, $50, $100, $150, $200
  3. What value can the option be worth at expiration, respectively? $0, $0, $0, $50, $100?
  4. Given these outcomes, the price of the option today has an expected value (aka the probability weighted value)

The Volatility Surface

Term Structure

Skew

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Friktion

Friktion

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Friktion brings high quality portfolio management to DeFi.