24 lines
1.0 KiB
Plaintext
24 lines
1.0 KiB
Plaintext
Finding Mispriced Options • 159
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Plugging in the 39/46 for Mueller Water, I would get the following:
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6/21/201612/24/20156/27/201512/29/20147/2/20141/3/20147/7/20131/8/20137/12/2012
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Date
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Mueller Water (MWA)
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Price per Share
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25
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20
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15
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5
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10
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-
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Y ou can see with Mueller Water just how big a 7 percentage point dif-
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ference can be for the bid and ask implied volatilities in terms of projected
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outcomes. The 39 percent bid implied volatility generates an upper range
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at just around $15; the 46 percent ask implied volatility generates an upper
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range that is 20 percent or so higher than that!
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Overlay an Intelligent Valuation Range on the BSM Cone
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This is simple and exactly the same for a big company or a small one,
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so I’ll just keep going with the Oracle example. After having done a full
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valuation as shown in the exam valuation of Oracle on the IOI website,
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you’ve got a best-case valuation, a worst-case valuation, and probably
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an idea about what a likely valuation is. Y ou simply draw those numbers
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onto a chart like this: |