OPTIONS TRADING BASICS | Implied Volatility Explained EASY TO UNDERSTAND

Options trading implied volatility explained in an easy to understand way. Most traders overcomplicate IV, but it's basically the supply & demand of an options trade, which dictates the price of a given option.

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[lakeguy]

respectfully, your explanation of IV is way off the mark. Volatility is the measure of the range of something around the mean. Historical volatility of a stock's price is the measure of the range of price movements (both up and down)for the previous N periods. Implied volatility can be determined by working backward through the Black-Scholes model given known market prices for an option. With the other inputs (to BS) known, a market price of X implies future volatility of V. It is not a reflection of whether the option is underpriced or overpriced. It does not reflect supply and demand.

[cknight]

Another great video! Thank you. Favorite TA tools here are: SMA9, EMA20, SMA200, MACD, RSI, resistance and support levels, typical patterns, hollow and Haiken-Ashi (sometimes) candles.

[kevinbean]

You explain options in the most understandable way!! Thanks

[clivedenpress]

Hello can someone please tell me why there is no number on my MID VOLATILITY on my option screener? does this only show when the market is open? thanks

[kane]

Nice to the point explanation. Thank you.

[passivedividendsoptions]

Great explanation, keep the videos coming

[unknownKnownunknowns]

implied vol will change based on where the market bets, correct? similarly, the point spread on a football game will change depending on the dollar volume of bets placed for either team

[edmandell]

Great video. So we buy options when IV is low because we except that to change to a higher IV over a certain duration? And we selling options when IV is high because we expect the IV to go lower hence price will not move as much allowing theta to benefit the seller. Did I get this correct?

[roo]

Great video btw. I have a question, in regards to holding on to ITM call into earnings. I currently have a 725 strike in nvda with 3/28/24 exp. Ive had it for about a week. iV is around 58%. Earnings is on wednesday and there is one more trading day (tuesday) before 2/21/24 earnings. Will IV increase drastically the day before earnings? Thinking of just holding it on tuesday then closing my position that tuesday before earnings to not play earnings because IV crush may tank my call option

[jasonpermanna]

I did 1 day expiration strangle for cpi day nov 10. I open before market close around 3pm and close at open for 63% gain on the call side is around 500% not sure the put side. I saw on thinkorswim iv chart I got crush but how come I ended up being profitable? But with Walmart I loss money at open 43%🐋

[honeyqk]

How does it make sense to be able to open the options chain on TOS and just go ahead and sell an option contract without even buying it in the first place! I am so confused by this concept. Wouldn't you have had to purchase it before being able to sell it? Do you know what I'm talking about, if so, do you have a video on this?

[chrispersaud]

Looks the market will start it’s next major leg down at the end of this week. What do you think of the strategy to sell leap PUTs so I could be assigned the stock at a lower price?
I may not get assigned, but I will get the premium.
Good, bad, risky?

[philochristos]

IV seems to always go up in the weeks leading up to earnings calls. At least that's been the case in the stocks I've been watching, like Nvidia. In the case of Nvidia, the price went from around $400 to $500 during the month leading up to the last earnings, but the IV also went way up. I don't remember what it was when the price was around $400, but it was around 100 just before earnings. Some call options I was looking at were worth about $25.00 when the stock price was around $400, and the same options were worth just over $100.00 just before earnings. I wonder how much of that change was due to IV. I mean suppose the stock price stayed flat that whole time, but IV went from, say 40 to 100. How much would the options price have changed?

[eversunnyguy]

When you say buy an option...it can mean CALL or PUT options..it includes both right ?

[knowledgehub]

the only general rule that always beats the IV is the strike price, for two options of the same expiration date : better strike price = automatically better price no matter what is the IV

[alphabeta]

3:00 IV crush
4:00 ATM vs ITM
5:00 IVP
7:00 Being a seller vs a buyer

[bola]

Questions please.

I thought IV was non-directional eg just reflected price moves whether up or down. You are saying however IV is very much directional, driven by demand eg buying, correct?

You then say there is strong demand for very far out options (eg LEAPS) and very near term options. However, you next say IV for LEAPs is always low?

You also say DITM and far out the money options tend to have high IV, correct?

[ngchongsin]

You going to do a sell cc on your tesla, when otm?

[Seanrealz]

I just realized you misspoke but later corrected on screen with text “*shorter ex.” Man I didn’t read and kept hitting replay ⏪ …😅

But I kinda still don’t get “everyone is focused on the short term and worried about the long term.” 🤔

[jaaarcila]

What happend with : The concept about inverse relationship between underlying price and implied volatility ?