- How To Trade Volatility | Options trading IQ
- FTSE Implied Volatility Index Series
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There are some expert taught traders to ignore the greek of option such as IV and HV. Only one reason for this, all the pricing of option is purely based on the stock price movement or underlying security. If the option price is lousy or bad, we always can exercise our stock option and convert to stocks that we can owned or perhaps sell them off on the same day.
How To Trade Volatility | Options trading IQ
Option premiums are manufactured from two main ingredients: intrinsic value and time value. Intrinsic value is an option's inherent value, or an option's equity. If you own a $55 call option on a stock that is trading at $65, this means that you can buy the stock at the $55 strike price and immediately sell it in the market for $65. The intrinsic value or equity of this option is $65 ($65 - $55 = $65). The only factor that influences an option's intrinsic value is the underlying stock's price versus the difference of the option's strike price. No other factor can influence an option's intrinsic value.
FTSE Implied Volatility Index Series
Closed my Oct BB (a few moments ago) for 89% profit that is the best of the 8 BBs I traded since Gav taught us the strategy so, the next coffee or beer on me, Gav 🙂
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How would you replicate/replace an equity portfolio that is $55k long IWM and $55k short SPY with options? I tried buying ATM SPY puts where my notional was $55k and buying IWM calls where my notional was $55k, but I 8767 ve found it essentially becomes a long straddle/volatility. please help
Also consider that each strike price will respond differently to implied volatility changes. Options with strike prices that are near the money are most sensitive to implied volatility changes, while options that are further in the money or out of the money will be less sensitive to implied volatility changes. An option's sensitivity to implied volatility changes can be determined by Vega – an option Greek. Keep in mind that as the stock's price fluctuates and as the time until expiration passes, Vega values increase or decrease , depending on these changes. This means that an option can become more or less sensitive to implied volatility changes.
Example: for credit spread we want low IV and HV and slow stock price movement. If we long option, we want low IV in hope of sell the option with high IV later on especially prior to earning announcement.
Or perhaps we use debit spread if we are long or short an option spread instead of directional trade in a volatile environment.
You've probably heard that you should buy undervalued options and sell overvalued options. While this process is not as easy as it sounds, it is a great methodology to follow when selecting an appropriate option strategy. Your ability to properly evaluate and forecast implied volatility will make the process of buying cheap options and selling expensive options that much easier.
List of the most traded stocks on the . stock market sorted by average daily trading volume calculated over the past 8 months. The most raded stocks are at the top.
With a Condor (or Iron Condor which writes both Put and Call spreads on the same stock) your best case is for the stock to go flatline the moment you write your deal, and you take your sweetie out for a $7,575 dinner.
6. Make sure you can determine whether implied volatility is high or low and whether it is rising or falling. Remember, as implied volatility increases, option premiums become more expensive. As implied volatility decreases, options become less expensive. As implied volatility reaches extreme highs or lows, it is likely to revert back to its mean.