Mastering Implied Volatility: What Options Traders Need to Know

Master the meaning of implied volatility (IV) and how changes in IV impacts popular options strategy profitability.

In this video, you'll learn the basics of what implied volatility (IV) means in options trading, as well as understanding why IV changes, and how popular options strategy profitability is impacted when IV increases and decreases.

==== Chapters ====
0:00 Intro
0:30 What is Implied Volatility?
2:30 Implied Volatility vs. Realized Stock Volatility
3:09 Free 170+ Page Options Trading for Beginners PDF (My Best Work)
3:34 Popular Options Strategy Performance vs. Changes in IV
14:07 How to Understand Changes in Implied Volatility
15:16 Implied Volatility Behavior on Meme Stocks (Bonus Section)

=== Recommended Videos ===

===== Summary =====

1️⃣ What does Implied Volatility mean in options trading?
In options trading, Implied Volatility (IV) is a crucial metric that reflects the market's expectations for future volatility of the underlying asset. It is directly related to the pricing of an option contract and serves as an indicator of how much the market believes the asset's price will fluctuate over a given period. A higher IV typically means higher option premiums, as traders are willing to pay more for the potential of larger price swings.

2️⃣ How does realized stock volatility impact option prices and IV?
Realized stock volatility, or the actual historical volatility of a stock, plays a significant role in driving option prices/IV. When a stock shows high realized volatility, option premiums often increase to compensate for the greater stock price movements, which in turn pushes up IV. Conversely, lower realized volatility usually leads to cheaper option premiums and lower IV. By keeping an eye on realized volatility, options traders can better anticipate shifts in IV and adjust their strategies accordingly.

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Disclaimer: Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction, or investment. Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past performance is not necessarily indicative of future results. I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make.

Disclosure: Some of the links in the video description are affiliate links, which means I receive a small amount of compensation if you sign up for these services using my unique link. If you want to support the channel, it's a great way to say thank you!

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[Fre_Lee]

Finally, a video that makes understanding Implied Volatility simple. Thank you!

[Richbumbullies]

Man one of the best channels you talk slow explain in depth give free game so when I go to spend my money on education I’m coming here

[maiiazhuk]

Love the presentation and whole explanation of IV! Thank you!

[biizing]

This is a masterpiece. I love your presentation so much. You make a confusing topic to be more clearer. Thumbs up!

[Arsenal]

Truly the best video on youtube for IV explanation and it also aged well based on the last (bonus) segment

[wassimyounan-ftti]

Your content is amazing, and the PDF is also very insightful (as an option trader with both academic and market experience I am claiming this). Keep it up!

[OptionRecom]

Insightful overview of Implied Volatility! IV gauges market expectations, and realized stock volatility deeply influences it. A rising IV hints at market swings, while a dip suggests stability. Notably, from an AI-driven trading standpoint, IV emerges as a key factor when selling options.

[constanted]

I love your content. Your explanations and examples are easy to understand. Thank you for posting. Keep up the great work that you do. Cheers from the Philippines 🇵🇭

[vital_]

Dude i watched a past video. Not sure what day it was. But bro! This helps a lot!

[curtisnyssen]

Great explanation on IV, really really enjoyed how you explained it. Defintately subscribing to your channel. Great work!!

[yjm_westcoastbro]

Professor Chris ! You tell it like it is bro for this infant beginner trader and appreciated

Marques

[agitomakishima]

I had this exact scenario happen to me on a trade today where i was right about the market move down and my PUT still lost money. very frustrating but i appreciate the explanation.

[HefTrade]

Fantastic video as usual Chris! I took the liberty of counting the 79 times that you said the word "Implied Volatility". Hope you are having a great day! -Evan

[drkiter]

Thanks a lot! I needed this info on IV to make better trades.

[meismtheism]

The visual presentation at 2:40 is excellent! Would love to see another video with that comparing historical IV vs. the actual moves of each stock! For example, how much more 'inaccurate' is a 50% higher IV and is that alone strategically tradeable?

[Dennis-srmq]

I just started learning about option trading but this is so confusing to me still I’m going to have to watch this over a few times

[MultiDimension_]

Great video sir I knew there was more to options then just buy call or buy put thank you

[aaronwcary]

Thank you so much for the value you're giving Chris, you've helped my trading a ton.

[ho]

In my opinion, more often than not, spy and qqq strangles work. All you need is one side to go up over 100% which happens a lot woth high strike prices.

[edmondprice]

The main question is how do you measure IV? How would you say IV is expensive or inexpensive? I use Think or Swims Historical IV line and generally say if IV high relative to where it has been. How do you measure IV to decide if IV is high and I should not buy an option or IV is very low and it would be a good idea to buy an option???