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Historical vs. Implied Options Volatility - Options Mechanics

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  • Опубликовано: 14 авг 2024
  • The difference between a stock's historical volatility and the implied volatility from options pricing creates our edge as traders because we have proved that options pricing is expensive (rich) long-term since IV overstates the expected move of an underlying security.
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Комментарии • 16

  • @nancypickering8217
    @nancypickering8217 7 лет назад +29

    Very worthwhile clear explanation; I am going to send this to one of my beginning option students.

  • @caeestevao
    @caeestevao 7 лет назад +9

    Great video! Well explained and backed up by actual data.

  • @alexgold432
    @alexgold432 7 лет назад +6

    Great job!! Really very helpful.

  • @cameronstate
    @cameronstate 7 лет назад +5

    If the formula used to calculate IV is historically and objectively wrong - by what appears to be a consistent, quantifiable percentage - why has the formula not been updated to correct for this? Or is it the case that this formula has the smallest average margin of error(that we've found) and we can't really do much better?

    • @OptionAlpha
      @OptionAlpha  7 лет назад +6

      The formula for IV isn't wrong it's just that as humans and even computers we cannot accurately predict the future. So when the future plays out it's always less volatile than expected.

  • @ljl451
    @ljl451 7 лет назад +6

    It is correct to say that very option contract has an associated IV value and the IV of a stock is a single number based on the IV values of a set of ATM options for the stock?
    Thanks!

    • @OptionAlpha
      @OptionAlpha  7 лет назад +2

      Yep generally correct and the number of ATM strikes and weighting you use determines IV.

  • @meghacapital4604
    @meghacapital4604 7 лет назад +4

    thanks

  • @scheherazade4617
    @scheherazade4617 8 лет назад +4

    Hi! In TOS in the option statistics there are some confusing numbers about HV and IV. For example FB IV 52wk hi and lo migh be .5 and .1. Then Current IV is 20%. Does that mean it is .2?

  • @Tejas_Shah
    @Tejas_Shah 7 лет назад +3

    What software are you using when showing the probability of exp cones?

    • @OptionAlpha
      @OptionAlpha  7 лет назад +3

      Just my broker platform at thinkorswim: optionalpha.com/tos

  • @jamesp8247
    @jamesp8247 7 лет назад +2

    at 22:22 you cannot change the option price by changing vol to whatever you want if that is possible anyone would
    change the vol reduce the price and place an order.

    • @OptionAlpha
      @OptionAlpha  7 лет назад +16

      Didn't say you could - we simulated an IV change so you could see the impact on optino pricing.

    • @OptionAlpha
      @OptionAlpha  7 лет назад +4

      option*