Hi Orwell
Yes they are addictive little blighters aren't they. Very complex and the pricing moves are often counter intuitive.
Re yr comments re the B-S model and "your trading bias should be to writing puts and buying calls rather than the reverse." I am not sure why you say that.
1 I am not sure that calls are cheaper and puts more expensive than the model. I do know that because of the extra fear of the downside the puts are more expensive for a given number of pips from the current price. Eg if Dax is at 10000 then a 9800 put will cost more than a 10200 call
2 just not sure re the B-S formula and relationship to price
3 I have been very surprised at how IV CHANGES SO QUICKLY and its impact on pricing. An easy way to "observe" this is to check the option pricing if say the market has a quick move up and down (of say 100 pips on the Dax) and the option prices will often be very different from at the start of the move; the market will be perceiving risk in a different way. To complicate it more the market does not seem to perceive such moves consistently as a higher likelihood of a continued down (or up) move. I could ramble on more but probs quite boring for most.
Am I missing something here based on your research?
Very happy to keep chatting if it does not annoy others?
Cheers g
(20min delay)