The Skinny on Options: Abstract Applications - April 19, 2021 - Building Expected Moves

published 2 weeks ago by tastytrade, Inc.

Today, we wanted to complete the conceptual tripod that we’ve been working towards for the last couple of weeks. First, we discovered the relationship that Standard Normal Variables have with the Black-Scholes Option Pricing Model. Then, we took the next step and began to standardize those Standard Normals into Z-Scores. Today, we complete the logic chain by moving into Expected Moves. What we see is that once we have the implied volatility from the Black-Scholes Model, it opens up the possibility of finding an Expected Move for a specific stock, across a specific time frame.

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