Below is some actual data for call options on Netflix (NFLX) from November 29, 2

Question

Below is some actual data for call options on Netflix (NFLX) from November 29, 2017·The options expire on January 19, 2018. NFLX's most recent closing price was $190.25, and the 1 month treasury rate (risk free rate) is 1.16% (annualized). There are 34 trading days between November 29 and iration (assume 252 trading days in the year). Fill in the Implied Volatility column below (you can use the spreadsheet I posted on Blackboard, but I'd encourage you to build your own Black-Scholes-Merton spreadsheet and then use it, it's a good exercise!) Option Price $156.60 $140.25 $90.29 $40.70 $10.43 $0.94 $0.25 $0.10 $0.07 Strike Price $40.00 $60.00 $105.00 $150.00 $190.00 $230.00 $250.00 $275.00 $300.00 Implied Volatility

Explanation / Answer

Implied Volatility is the volatility of stock price and majorly used during option pricing. IV increases with bearish market and decreases when market is bullish. Also, implied volatility based on probability and not any prediction.

There are two ways to calculate IV either by hit and trial or by IV calculator. Also there is formula to put in value which has critical calculations.

using online model considered as better option name as option- price or implied-volatility model.

Put the value like this: (taking last option as example)

Note: as mentioned spreadsheet is not givemn hence, this is how we can calculate the implied volatility for this.

Implied volatility shows the magnitude of a potential price change in respect to underlying price

Formula, if required= C(S,t)= N(d1)S-N(d2) Ke^- r(T-t)

Strike Price Option Price Implied validity (in%) 40 156.6 448.38 60 140.25 391.08 105 90.29 176.98 150 40.7 46.54 190 10.43 44.53 230 0.94 43.34 250 0.25 44.67 275 0.1 50.59 300 0.07 58.25

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