Options priced at 30% implied volatility can look cheap and expensive at the same time. This lesson shows how to measure how much a stock really moves, judge implied volatility against it, and decide whether to buy volatility, sell it, or stay out.
After this lesson you can
- Measure historical volatility from daily moves
- Judge implied volatility against short and long windows and its own range
- Match the trade to the reading: buy volatility, sell it, or stay out
- Choose between a single option and a spread by the level of implied volatility
- Treat an unexplained jump in implied volatility as a warning, and avoid the five mistakes
Chapters
- 0:00Cheap or expensive?
- 0:57Measuring how much it moves
- 2:07Short and long windows
- 3:08Judging the gap
- 4:14Implied volatility's own range
- 5:25Buying volatility
- 6:47Selling volatility
- 8:07When the jump is a warning
- 9:10Volatility for directional trades
- 10:38Five mistakes
- 11:26The whole lesson on one screen
Practice with:Volatility Lookup