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54. Kris Abdelmessih - Alpha is Illusive
Mutiny Investing Podcast
Understanding the Concept of Variance Time in Option Models
Implied volatility in option models is often inaccurately estimated because it assumes vol is equally distributed over the entire time period. However, vol is higher on business days and lower on weekends and holidays. To address this, the concept of variance time considers the proportion of volatility that occurs on different types of days. By incorporating this into option models, a more accurate assessment of implied vol can be achieved, which is crucial when trading cross-asset.
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