Why do index options encounter a turning point once call returns start to turn negative, somewhere a little bit out of money, and decrease the further out of the money they go? There is a huge debate on why this is the case. Professor Tobias Sichert, assistant professor at Stockholm School of Economics, offers insights on findings on volatility and OTM call returns, using OptionMetrics’ IvyDB US data.
Research: Volatility and OTM call returns
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