Hi David,
"The implied volatility decreases as the strike price increase" - I am not able to understand this concept, because as I thought that as strike price increase call option will be deep out of the money and put will be in the money (although this is relative to stock price), in both cases implied volatility should increase. At the same time, I am not able to comprehend the meaning of this statement (given in bold). Pls help.
(this was given as the explanation of one of the ans in practice exam 2007)
Rgrd,
OM
"The implied volatility decreases as the strike price increase" - I am not able to understand this concept, because as I thought that as strike price increase call option will be deep out of the money and put will be in the money (although this is relative to stock price), in both cases implied volatility should increase. At the same time, I am not able to comprehend the meaning of this statement (given in bold). Pls help.
(this was given as the explanation of one of the ans in practice exam 2007)
Rgrd,
OM