How Does Implied Volatility Affect Options Pricing?
Implied Volatility (IV) is one of the most important concepts that all traders must understand and for two crucial reasons:
- IV shows how volatile stocks [and the overall market] could be in the future
- Traders could make money on a volatility spike without having to predict the correct direction
In easy-to-understand terms, IV is the market’s forecast of the likelihood of changes in a given security’s price. Traders often use IV to determine if a stock could reach a specific price point by a certain time.
In fact, implied volatility is often used to price options contracts. For example, high implied volatility results in options with higher premiums and lower implied volatility means options with lower premiums.
In today’s video, I’m going to show you how to utilize implied volatility whether you’re trading earnings, an FDA approval, or even a name that’s catching huge headlines and one stock that I actually like to trade myself.
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But don’t worry, you can access this event from the comfort of your own home – just click here to save your seat.
