You observed a stock moves 2% stdev each day usually, except for days of earning announcement. In the latter case, it has a stdev of 10%. Today is a Friday. You are interested in an option that expires in FOUR weeks. Earning announcement will be on the next Friday. a. What should be annualized IV now? b. On next Thurday at close, what should be IV? c. On Friday at close, just after ER, what should be IV?

You observed a stock moves 2% stdev each day usually, except for days of earning announcement. In the latter case, it has a stdev of 10%. Today is a Friday. You are interested in an option that expires in FOUR weeks. Earning announcement will be on the next Friday. a. What should be annualized IV now? b. On next Thurday at close, what should be IV? c. On Friday at close, just after ER, what should be IV?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 8P: A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per...

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