Hacker Newsnew | past | comments | ask | show | jobs | submitlogin

The reason I discovered options prices were wrong is because for fun I created an In-The-Money visualization graph for when you're doing advanced options spreads and I noticed that the graph was asymetrical and profitability and loss made no sense. So with the help of Claude we debugged the code and came up with a pricing strategy that was closer to Black-Scholes. And it really is because it takes into account industry volatility and such it was a fun side quest and Michael is happy with the result which I am very proud of! It really makes me confident that one day, long live the king but, he is in his 80s. Decades from now I will be able to survive on my own, I hope.


But wait... That's a real phenomenon in markets, called volatility skew!

Volatility Skew: An uneven curve indicating directional bias. Commonly, equity markets show negative skew (higher implied volatility for OTM puts), signaling concerns about downside risks.

Options pricing is a real rabbit hole.

https://www.luxalgo.com/blog/volatility-smile-vs-skew-key-di...


Well, sometimes the way to teach people about pricing is to present them with incorrectly priced markets to exploit?


The market price IS the correct price. As is often said, "all models are wrong, but some are useful", including B-S.




Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact

Search: