In developping a options pricer, i need to list the features required, the data i hope to obtain from this pricer, the source of this data.
- stock price
- stock trend
- live call/put prices of options
- trend of option price relative to stock price trend
To get the stock trend i may have to rely on historical stock data, and make predictions based on those trends, possible algorithms:
- binary sequence bayesian tree
- machine learning
Then to relate the stock trend to options we can calculate the option greeks. That with the options trend can give us an idea of the risk.
Ultimately the pricer should determine which strategy is better suited in that market.
The pricer should also be able to warn of changes in volatility of option prices, based on IV and HV (vega).
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