Extracting a Volatility Premium with Equity Options?
April 12, 2011 - Equity Options, Volatility Effects
Are options for volatile stocks overpriced? In the September 2010 version of their paper entitled “Cross-Section of Option Returns and Stock Volatility”, Jie Cao and Bing Han investigate the relationship between option return and price volatility of the underlying stock. The focus on delta-hedged positions in options and underlying stocks calibrated such that the combination… Keep Reading