Analysis of options using volatility and other parameters
       Volatility coefficient (IV Index/HV)
       Correlation and Beta
       Lagged Correlation
       Option Volume and Open Interest
       Volatility Skew
              Volatility strike skew
              Volatility smile
              Volatility smirk
              Volatility time skew
       Volatility Surface

IVolatility Education

Analysis of options using volatility and other parameters


Kurtosis is the relative peakedness or flatness of a returns distribution compared to the normal distribution (a normal distribution has a zero kurtosis). A distribution is said to be leptokurtic if its tails are fatter than those of a corresponding normal distribution. It is said to be platykurtic if its tails are thinner than those of the normal distribution. Market returns for stocks tend to be slightly leptokurtic. This means that dramatic market moves occur with greater frequency than is predicted by the normal distribution.

Because kurtosis characterizes the flatness of returns, it can be applied to an option model. Consequently, a kurtosis greater than zero means fatter tails and the model underprices both out-of-the-money and in-the-money calls and puts. A kurtosis less than zero means thinner tails; and as a result, options are overpriced.

Terms available: 10, 20, 30, 60, 90, 120, 150, 180 days

Note: those charts are available to Advanced Historical Data service subscribers.

There are special options pricing models which use Skew and Kurtosis as additional parameters.