Option Implied Volatility using Newton's Method in Python

In today's video we calculate the implied volatility of a European option in python by using the Newton-Raphon Method.

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[juliacollin]

Once again blown away by how great your videos are -- thank you for sharing all of this information in such a palatable way

[dylan.masters]

This is great. Really informational and interesting. Thank you and keep doing what you're doing!

[bryanleekw]

great video! very clear to elobrate IV!

[nilkanthwable]

how to handle the cases when the itm option is priced below its intrinsic value?
Also for some itm option contracts, I get Iv as NaN even though it has a non zero extrinsic value. Could you please guide.

[rk_mymodules]

Good job!
Do you someone have an idea of how to get a convenient initial gess?
I found that the optimisation process depend a lot on the initial guess ; for example with the current example values, we diverge while first guess is out of ]0.05, 4[ interval.

[hochspannunglebensgefahr]

excellent video, but i have a question, from where do we get the market price of the option ? like for example i want to know the price of the call option on USD/EUR for a spot S, strike K and time T

[chiemelienwanisobi]

can you provide a tutorial on calculating sticky strike vol vs sticky delta vol?

[scGR]

i have a beginner question, does imp vol between different maturity options shows a linear relation?

[SantiagobgbO]

hi ! nice work. ¿this could be used for example if the price of an options has high implied volatility, and we want to take advantage of it while the price is still stabilizing? or what will be a good use of it in real life option exchange? because they actual use B&S to get option prices in the platform of trading im using. =) help

[armandcharlesngabirano]

Excellent content sir however I am sorry to bother you with this question: can we proceed the same way if the risk free rate is negative? We will have to change parameters like adding a shift parameter?

[GodX]

Hi, Thank for your cool clip. Does it make sense for stock prices?

[mrjaekwan]

sorry to bother. just a simple question. wouldn't abs(vol_old-vol_new) be abs(P-MP) compare to the tolerence? some other text saying otherwise. want to know the difference

[KonstantinUtkin-qcro]

Maybe I am doing something wrong, while if I use it for, let's say Deribit BTC options, this method would hardly reach good result in reasonable iterations number if initial IV guess is wrong. For example, if IV provided by Deribit feed is 1.16 and I put 1.00 as initial guess, it would use over 20k iterations and still not able to reach neither 0.0001 price precision nor volatility precision. If I calculate initial IV guess using another method (like linear approximation), it's making rather small correction for IV, like from 1.16613995 to 1.16614023.

[aabhashshrestha]

Hey I need to use Newton Raphson method in order to solve two non-linear equations related to black-scholes model. Will this formula work?

[balrajs-jf]

This code not working for me.
i have this error...
RuntimeWarning: divide by zero encountered in scalar divide
vol_new = vol_old - C/Cprime
RuntimeWarning: invalid value encountered in scalar divide
return numerator / denominator

[ambujyadav]

hii I am getting -
nan
RuntimeWarning: divide by zero encountered in double_scalars
vol_new = vol_old - C/Cprime





can u please give me suggestions to resolve this error...

[investidorcalejado]

what version of python are you using? with python 3.10 im not being able to download some of the modules!

[zhenggoh]

Hello may I know how to obtain your graph?

[mrjaekwan]

why isn't sigma not in a fuction for vega?