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Mike Green: Recession Approaches As Housing & Car Markets Weaken
Forward Guidance
What Is the Performance of a Call Option?
The price of the underlying shouldn't change, but the price of the volatility of the option should change. If I feel high levels of uncertainty about my ability to transact in the market, I can crank up the implied volatility. Or I would flip around and say, "I'm going to sell futures to delta hedge" The key question is, should they be allowed to do this given the dynamics that we're not settling? And the second component is, what's the incentive structure if I'm making money on selling 20% maybe I should go to 30. Maybe I shouldgo to 40. Right. Like, where's the optimal amount?"
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