What problem does it solve?
It solves the problem of determining whether an option’s implied volatility is cheap or expensive by comparing the market-implied volatility surface to realized volatility from historical prices.
Core Features & Use Cases
- Volatility surface snapshot & shape analysis: Builds a term structure view of ATM volatility plus skew (risk reversal) and smile curvature (butterflies) from the appropriate implied vol surface.
- Greeks-aware option pricing: Prices specific options to obtain premium and sensitivities (delta, gamma, vega, theta, rho) consistent with the surface-derived implied volatility.
- Implied-vs-realized regime assessment: Computes realized vol across multiple lookback windows from historical data and compares it to matching implied tenors to produce a rich/cheap signal and strategy guidance.
- Use Case: If you’re considering selling or buying options around a macro event, you can assess whether implied volatility is elevated relative to what has recently been realized and choose a volatility-driven trade with the key sensitivities understood.
Quick Start
Use option-vol-analysis to assess the implied-vs-realized volatility premium for a targeted underlying by first pulling the vol surface, then pricing the selected options with Greeks, and finally comparing against realized volatility computed from historical price history.
