How did you get the implied probabilities from the vanilla option markets? I don’t know an obvious way to do it, perhaps the simplest (and wrong) approximation would be to take the BS IV of traded vanillas at the strike price and plug it into binary BS formula?
Dividing the option price by the current spot or future underlying price is definitely not a correct way to do it.
I just ball-parked the numbers from a the tightest call spread currently tradable in the market. If precision was important I’d do something more sophisticated.
Yeah not really sure why you’d divide the option price by current spot?
How did you get the implied probabilities from the vanilla option markets? I don’t know an obvious way to do it, perhaps the simplest (and wrong) approximation would be to take the BS IV of traded vanillas at the strike price and plug it into binary BS formula?
Dividing the option price by the current spot or future underlying price is definitely not a correct way to do it.
I just ball-parked the numbers from a the tightest call spread currently tradable in the market. If precision was important I’d do something more sophisticated.
Yeah not really sure why you’d divide the option price by current spot?