Where implied volatility comes from

For each leg Tented solves the implied volatility that reproduces the leg’s current mid, using Black-Scholes (Black-76 for futures options) over the time to that leg’s own close. IB’s IV is used only when the solve fails. A leg with no usable IV is priced at 20% and flagged “IV 20%?”.

For SPX, XSP, RUT, NDX, DJX, SPY, QQQ and IWM the solve uses the level their calls and puts imply by put-call parity, not the index print, because index prints lag and ETF forwards carry dividends. The legend says “Options price SPX at …”.

The curves price from each leg’s live mid. The legend shows “Quote lagging: …” when a mid cannot be reproduced by any volatility, such as one below intrinsic value. When a leg has no market at all, see Estimated marks.

Note

American-style options (index ETFs and single stocks) are priced with the European formula: early-exercise value is not modeled, and for ETFs a T+ line dated after a dividend is approximate.

The Risk-free rate is Auto (the 1-month Treasury yield) or Manual. Auto uses the last rate it read and says when it could not refresh; choose Manual to set the rate yourself.