giants2010

verse214 Wrote:
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> I don't see how a stock's volatility could drop to
> zero within a day's worth of trading (or absence
> thereof). It depends on the period of time you're
> using to calculate the vol. If it's an historical
> 30 day period then I don't see how it could
> plummet to the point where the option is worth
> zero in one trading day.

Suppose you had a call option on xyz stock, volatility input is 20%, expiration 3 weeks away or so.

Then suppose trading gets halted for late filing/registration or something equally beaurocratic. Implied future volatility would be zero until it started trading again, which would be after the firm met its obligations. In the mean time, if options expiry were to be before the firm is slated to meet those obligations, I can see the option being worthless.