Implied distributions

Discussion in 'Options' started by the learner, Feb 2, 2022.

  1. newwurldmn


    It can be approximated by pricing butterflies or call/put spreads. You can also use N(d2) as a CDF
  2. Thank you, yes that's what they are suggesting here. But to calculate these butterflies with extremely small strike distance we should interpolate and I am not sure about 2 things: what interpolation to use (not sure it really makes a difference on such small grid) and, more importantly, how close we need to choose the strikes. 0.01 USD on QQQ would be a good choice or still too large to make a sensible approximation?
  3. LM3886


  4. newwurldmn


    If you are using listed butterflies then you are limited to the strikes that exist.

    if you are using fictitious butterflies, you might as well use N(d2)