Our result of setting the strike price of options at the maximum level compatible with the effort constraint is not directly comparable with that--advocated for instance by Hall and Murphy (2000)--of issuing at-the-money
options, as we do not explicitly consider the value of the underlying assets at grant date.
All implied volatility indices are constructed for (hypothetical) at-the-money
index options with a constant time to maturity.
Until the mid-1990s, companies only had to book as compensation expense those stock option grants that had positive intrinsic value--hence the popularity of at-the-money
(as opposed to in-the-money) option grants.
option intended to be at-the-money
should have an exercise price of
We propose to compute the risk minimization hedging using standard options by jointly modeling the underlying price dynamics and the Black-Scholes at-the-money
implied volatility explicitly.
That is, if the BS model assumptions were literally true, the IV from a deep-in-the-money call should be the same as that from an at-the-money
call or an in-the-money put.
For example, we know of a retailer that emerged from bankruptcy and gave a new CEO 1,000,000 at-the-money
options at a low stock price ($10).
Lassek explained terms such as margin call, at-the-money
option and strike price during the seminar.
However, the degree of nonlinearity tends to be small for at-the-money
Louis' monthly Monetary Trends, said, "Using the trading prices of options on the S&P 100, the CBOE estimates the implied volatility corresponding to a hypothetical at-the-money
option with one month to expiration.
In the OTC market for currency options, financial institutions quote prices for three products in particular: at-the-money
options and two types of option combinations known as risk-reversals and strangles.
However, most of these companies have at-the-money
option programs with constant exercise prices.