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Option Price Calculation Model


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Hello,

If my understanding is correct, option prices on IG are not taken from an exhange, but rather they are computed using a variant of Black-Scholes. Does anybody have details on how exactly IG is using this model to compute prices? I am assuming they are computing volatility from the past data and use that as an input to the BS formula for IV, but does anyone know how exactly are they calculating (implied) volatility?

The reason I am asking is, I want to backtest some daily option strategies and I need historical options data from IG. Unfortunately it is very difficult (sometimes near impossible) to pull historical options chain from IG API. Especially the naming convention of epics for daily options is very confusing. Hence I thought that instead of pulling historical option data I can simply compute them using IG's model for my backtests. 

Thanks!

 

 

 

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Yes for weekly and monthly options IG's prices are very similar to options traded elsewhere. However, most of their daily options do not exist anywhere else, hence it is impossible to obtain/purchase that data from some other resource. 

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    • Hi KoketsoIG, Thank you for the clarification on that. Cheers
    • Dear @millennium_falcon, Hey there! Thank you for reaching out. Just a heads-up, you can only have one API key for each environment, either live or demo. No third API key can be created.  Thanks, KoketsoIG
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