Options Jive

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Volatility Surfaces

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Option pricing models require assumptions about stock price dynamics that are not entirely accurate.

For instance, the Black-Scholes model assumes that stock prices follow Geometric Brownian motion, which does not take into account jumps, splits, fat tails, or changes in volatility.

These dependencies result in differences between theoretical option prices and actual option prices, and these differences can be visualized through the implied volatility surface.

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