Implied Volatility Explained | Options Trading Concept

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Implied volatility is one of the most important concepts to understand as an options trader.

Implied volatility represents the option prices on a particular stock, which is an indication of the future stock price movements that the market is expecting.

Stocks with more expensive option prices have higher implied volatility, indicating larger expected price changes in the future. On the other hand, stocks with cheaper option prices have lower implied volatility, indicating smaller expected price changes in the future.

Additionally, implied volatility can be used to calculate the one standard deviation expected stock price ranges over any time frame.

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Comments

projectoption says:

Ultra-Competitive Commissions. Close Trades for Free.* $10 Commission-Cap Per Option Leg.**
https://www.projectoption.com/tastyworks/

pawan mahal says:

Great explanation!

ednakazuya12 says:

Awesome video and thanks for the information the only thing that bothers me is that there is only 252 days of trading. Do I still divide 30/365 for the monthly to get the monthly

Green Go says:

Is there any meaning at the time buy or sell option by considering IV value of particular strike price?

Puru Date says:

Hello Presenter and viewers. Let us take an example of Options contract in India. As of today, 26th April expiry has life of 30 days. I would like to refer to commentary from 10:18 to 10:21 which explains calculations of an expected ranges. Should I use 30 instead of 365 in the denominator? Because, option contract with 26 April expiry has life of 30 days

Wedgewood Pinseekerston says:

Brilliant explanation

CHACE says:

Tasty Trade will go off on why they use SD but never explain why. This is one of the only places on the internet that simply explains the relationship between IV and SD.

Saitom Sai says:

GREAT VIDEO THANKS

Ajinkya Deshpande says:

by far, best and clear video on internet

boygenius7 says:

I was meant to find this page. Just today im holding $14 AMD weekly calls exp Feb9. ER was a beat and stock runs up but my calls are losing value. Im still learning but i was confused today. This video was helpful. Hopefully i can apply this to my contracts to see in details exactly why i was losing money today. Im subbed btw. Thanks

Block Club says:

This video really helps your odds. Thanks!!!!!!

sagar tikyani says:

so while trading in options i would want to look for stocks with higher implied volatility right?

Joel Mitchell says:

Very informative, exactly what I was looking for

per aspera ad astra ¿ says:

Hi Chris,

A couple of questions. Is there a place where IV data can be obtained? Is there a screener for this?

And, doesn't IV change continuously? Rather than reference data extending back 1 year?

Also, is there a broker that allows credit spreads in an IRA?

joan v says:

hi, when you calculated the 30 days, you said there's a 68% probability that stock will go + or – 10.75, how did you come up with the 68%. sorry, just trying to get a clear understanding of high IV works. And should a lower IV be a better buy than a higher IV?

projectoption says:

What's your biggest point of frustration when it comes to understanding implied volatility? Comment below!

Siddhesh Tulaskar says:

Great video you are educating all the youtuber's

Carlo Kop says:

Are you sure you need to divide the number of days to expiration to 365?
The markets aren't open 365 days a year. I believe you need to calculate the number of trading days trough 252 (trading days a year)

Stanley Mars says:

when you apply this formula do you have to use the current stock price at what the security is trading at this very moment multiplied by the IV of the stock price option you're willing to buy, or is it the price of the stock you're speculating the security is going to reach multiplied by the IV

Brandon Low says:

How do you calculate sq root? As your video shown $250×15%x 30/365. How to calculate the square root

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