How Option Prices Affect Implied Volatility & Standard Deviation
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- Опубликовано: 3 июл 2024
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Love from India. You are helping us in unimaginable way. Thx & god bless.
Legit a legend! The explanations are clear, concise & tremendously helpful.
KEEP DOING IT. YOU ARE GOOD AT EXPLAINING
Great explanation!
another great video. you guys have helped make me a better trader and I really appreciate all the excellent work your whole team puts in thanks bud!
excellent video, very good explanation.
thank you.
also options trading is super addictive and I'm kinda a stats guy so it really helps me get behind a trade when I have statistics on my side
Very well explained man
Great video. Thank you Sir.
So for example in an earnings announcement IV goes up because more people buy options making the value of the options up then after the underlying price moves, people sell their options bringing down the value of the options which brings the IV down. Similar to how a stock increases and decreases in value. This is some inception trading...
Nice 2:00 options are insurance for shares
Hi Mike - this is a great explanation. It appears though, that this method is how you find the IV for a particular strike. How then do platforms like Tasty Works, or ToS, calculate the IV for the entire stock? When we talk about a stock having high IV, how is that calculated? Is that an aggregate of all the individual IV's per strike price, of all contract expiration cycles? Thanks,
Here's a pretty heavy segment that may help:
www.google.com/url?client=internal-element-cse&cx=015477303216471237373:u_cnlyqjhzi&q=www.tastytrade.com/tt/shows/the-skinny-on-options-modeling/episodes/when-to-use-iv-or-vol-index-12-15-2016&sa=U&ved=2ahUKEwjpqLqrgMPoAhXwB50JHZzrBaUQFjAIegQIBBAC&usg=AOvVaw36OoKG735FqmlP0N6hp4DE
Hello bro. I understood topic about implied volatility. But if asset price go up iv drops and options loses by Vega ... If iv increase ,asset price drops and option decrease by -delta .. then how we get profit.
Essentially, IV is simply a metric to show the buying/selling frenzy?
Option prices are only basically dictated by the market (supply&demand). The Black & Scholes model is a reliable attempt to put some math behind this market dynamic?
I see, implied volatility has no preference. Whether a call or put, it is the momentum of the underlying that dictates implied volatility. Just depends which side your on.
Yup, the idea is more about price bands and cones, no particular direction
It might be a very basic question, but you say options price drive IV, but as far as i understand IV is require to calculate the option price. If we already know the option price why at all we need to find IV?
Because IV helps us gauge potential movements, and also helps us put context around the option price being relatively cheap or expensive via IV Rank.
IV is required to calculate the option's price, but IV is unkown until we solve for it, so we take our known variables, solve for IV, and then go back and plug IV in to determine the option's price. Either way, IV is an important metric that can help us strategize around potential movements or lack-thereof
Its part of the scholes model in academic sense and in the real world its backsolved for ppl to guesstimate of options are cheap or insanely rich.
Can you explain same concepts with the context of time?
Sure!
adding more time adds more uncertainty, which widens standard deviations and expected moves. Very similar to expanding IV, adding time works similarly, except time doesn't expand and contract.
I hope this helps - shoot me an email at support@tastytrade.com for a deeper explanation!
Longer exp helps your vega, hurts the gamma - see Ursone book on greeks, or natenberg book
Basically, IV means your chances of long/ short option to be expiring worthless at expiration?
Great video. Thank you. I hope all the people who downvoted lose tons of money to you.
Is this how the PROB ITM/OTM values are calculated in broker platforms? There are conflicting explanations of how the Prob ITM/OTM is calculated.
prob ITM/OTM is calculated using standard deviations & implied volatility. In other words, OTM/ITM percentages are affected by time left to expiration, and implied volatility.
Those come from delta, and there is math behind that but its a delta derived idea. Prb itm roughly delta And 1 - delta is a rough estimate of ruin probability ie prb OTM.
can IV change without change in price? If yes, how it works? Just started learning about Options and I am not able to find out answer to this....
Option prices determine what IV is, so no. If there is a change in IV, that reflects a change in an option's price.
@@tastyliveshow Thank you for reply...
20% IV for a stock at 100, shouldn’t 1SD be 90-110 ?
@@tastyliveshow I would say answer is Yes. Assume 7 days have passed but the Option price is supposed to reduced to due to theta burn but if it still remains the same that implies IV is more and nullified 7 days of theta.
@@hbpilot70 the math using sq roots of days to exp and the 100 reference rate confirms its up 20/down 20
10 users that dislike this got crushed by IV
Its starting to kinda make sense lol
One standard deviation is 68. Did you guys make a mistake?
Also you should have said 68 percent ITM, not OTM.
this is wrong can not be true. you are using Standard deviation wrong as it applies to stocks
it is impossible for a stock to go below zero however the sky is the limit on the upside
so the predictions or projections for standard deviation must skew to this reality of stocks can't go below zero
in your example @5:10 where 50 is the middle and it can go up or down 25 this is wrong. it should be a percentage up or down and skew/scale as it goes down.
just think about how ridiculous it would be for a deviation to go up more than 100 percent and down more than percent in a similar example using the fallacy here.
unfortunately all trading platforms are using an incorrect version of standard deviation because stocks can't go below zero and they should not just cap the downside they must skew
Hello bro. I understood topic about implied volatility. But if asset price go up iv drops and options loses by Vega ... If iv increase ,asset price drops and option decrease by -delta .. then how we get profit.
The IV expansion could offset the adverse position delta