As a holder of both CDYO & CDY, the long term setup [Link] & Friday's upside break [Link] has me pulling one of my old quant models from the bottom drawer.
The chart below illustrates Cellmids company option CDYOExp. Oct 16 @ 3.4cYellow overlaying the underlying stock CDYBlue
Price has tracked fairly closely to June 2016 from which point beta reliability has expanded.
Today the option price has well overshot to the downside on a historical basis.
What I would like to build into my models is a measure of time decay and acceptable volatility expansion over time.
Black Scholes makes the assumption that the risk-free rate and volatility of the underlying are known and constant.
This if fine in a huge blue chip however this is where I find the methodology inappropriate for a micro.
