Patent ID: 7401042

Claim:
A method for measuring a price level of options on a given underlying security based upon a volatility of said underlying security instrument comprising: measuring variation of price of each option series in a collection of market prices of a collection of option series on a single security calculating a theoretical return on said option series attainable from delta-neutral hedging said option series at a market price; calculating a composite return attainable from said calculated theoretical returns of said options in said collection of option series, including returning a rate of return of said option series; and calculating a unique volatility estimate based upon the calculated composite return derived from market prices of a collection of options series, comprising: charting volatility on a vertical axis of a graph; charting interest rate on a horizontal axis of a graph; representing a function of a set of call options on said graph, wherein said function of the set of call options is a declining function; representing a function of a set of put options on said graph, wherein said function of the set of put options is a declining function; and calculating a unique volatility value as an intersectional point the point of intersection of said functions of the set of call options and the set of put options.