The visual presentation at 2:40 is excellent! Would love to see another video with that comparing historical IV vs. the actual moves of each stock! For example, how much more 'inaccurate' is a 50% higher IV and is that alone strategically tradeable?
Your content is amazing, and the PDF is also very insightful (as an option trader with both academic and market experience I am claiming this). Keep it up!
Fantastic video as usual Chris! I took the liberty of counting the 79 times that you said the word "Implied Volatility". Hope you are having a great day! -Evan
I love your content. Your explanations and examples are easy to understand. Thank you for posting. Keep up the great work that you do. Cheers from the Philippines 🇵🇭
Insightful overview of Implied Volatility! IV gauges market expectations, and realized stock volatility deeply influences it. A rising IV hints at market swings, while a dip suggests stability. Notably, from an AI-driven trading standpoint, IV emerges as a key factor when selling options.
Great video Chris is not a joke like those clowns on You Tube, they think they know it all. Keep the good work up. Thank you, Chris again for the efforts that you put into those videos to educate us.
I had this exact scenario happen to me on a trade today where i was right about the market move down and my PUT still lost money. very frustrating but i appreciate the explanation.
So I have a question when trading close to expiration options what should be the standard rule or metric when buying either puts or calls can you make a video about that or explain briefly thank you
Thank you! I just spent a ton of time creating an Options Trading for Beginners PDF (170+ pages now) that includes my best explanations/visuals explaining key options trading concepts and strategies. Check it out: www.dropbox.com/scl/fi/g7d402wnapqexq344ct73/options-trading-for-beginners-aug15-v1.pdf?rlkey=dort61xyaz1rubndbwbqmhd5i&dl=0 If you want updates to the PDF over the coming months/additional learning resources, consider dropping your email on the page here: geni.us/options-trading-pdf
Thank you for the great explanation, I have a question. I saw most of your educational videos but never touched the gamma exposure level, Is the GEX something important to rely on, or is it a kind of myth
The main question is how do you measure IV? How would you say IV is expensive or inexpensive? I use Think or Swims Historical IV line and generally say if IV high relative to where it has been. How do you measure IV to decide if IV is high and I should not buy an option or IV is very low and it would be a good idea to buy an option???
So how do you tell if Implied Volatility is high. IV rank or IV %tile? or a combo of both? For example if IV %tile is 93%, and IVR is around 30- does the underlying have high implied volatility?
Thank you! I just spent a ton of time creating an Options Trading for Beginners PDF (170+ pages now) that includes my best explanations/visuals explaining key options trading concepts and strategies. Check it out: www.dropbox.com/scl/fi/g7d402wnapqexq344ct73/options-trading-for-beginners-aug15-v1.pdf?rlkey=dort61xyaz1rubndbwbqmhd5i&dl=0 If you want updates to the PDF over the coming months/additional learning resources, consider dropping your email on the page here: geni.us/options-trading-pdf
Can you please comment on the company compass pathways, i am looking at 2024 may , but volume is low and obviously in the money like you said . Thank you
What about volatility about a line that is not horizontal? If there is a reduction in volatility, the price wouldn’t stop changing…but its direction would become more predictable, which could either be a profitable direction or not. I guess you would have to rotate the basic graphs that are being combined to get the others
I use Python to do the data analysis and use matplotlib (python library) to create the graphs. Then I work with a video editor who animates them. I believe in After Effects
That would be a large move for sure and not common in most instances. In SPY, we could easily see a 20% IV to 30%+ IV in a market downturn, and a similar drop in IV from the bottom of a market drop into a rally. The big IV moves were to illustrate the changes in strategy profitability at various stock prices. Also, the passage of time has a big impact on strategy performance as well, which would add to or offset the discussed changes in IV in the video.
With the example of being right directionally, but wrong with IV (@16:00min), all thing being equal, would a trader not close the position when the stock price fell below the strike price (presuming they had already at least broken even)? One other question, do you have a rule of thumb when it comes to entering a trade? Would you disregard something if the IV is below a certain amount? P.S., I like your style ;)
Hi, I watched most of your videos, here I am confusion by your telling that if IV increases price for a call will increase If I'm not wrong iv increase (i.e: VIX ) increases stock falls and iv falls stock goes Up Pls if possible clarify my doubt any one who is reading my comment pls explain
Implied volatility is both directions, but option prices can 'skew' to one direction (OTM calls much more expensive than OTM puts at equidistant strikes, or vice versa). A stock's realized volatility (sometimes called historical volatility) will impact a stock's option prices (implied vol). Higher realized stock volatility will lead to more expensive option prices (higher implied vol), and vice versa. Every stock has its own level of realized volatility and therefore implied volatility.
In my opinion, more often than not, spy and qqq strangles work. All you need is one side to go up over 100% which happens a lot woth high strike prices.
Thank you! I just spent a ton of time creating an Options Trading for Beginners PDF (170+ pages now) that includes my best explanations/visuals explaining key options trading concepts and strategies. Check it out: www.dropbox.com/scl/fi/g7d402wnapqexq344ct73/options-trading-for-beginners-aug15-v1.pdf?rlkey=dort61xyaz1rubndbwbqmhd5i&dl=0 If you want updates to the PDF over the coming months/additional learning resources, consider dropping your email on the page here: geni.us/options-trading-pdf
The IV number comes from a broad basket of options in each expiration cycle (each expiration has its own IV calculation). As traders we buy/sell options, and the supply/demand dynamics change the option prices. The option prices go into the IV calculation, so it's the changes in the option prices (which reflect stock price movements/volatility expectations/economic expectations/etc) that drive changes in IV. You could also argue though that IV levels change options trading behaviors. For example, super high IV might lead traders to become more hesitant of buying options and more willing to short options, driving option prices and IV lower.
Wikipedia definition: A meme stock is a stock that gains popularity among retail investors through social media.[1][2][3] The popularity of meme stocks is generally based on internet memes shared among traders,[4] on platforms such as Reddit's r/wallstreetbets.[5] Investors in such stocks are often young and inexperienced investors.
Probably super common on meme stocks that experience big IV changes as the stock price moves. Most stocks won’t experience massive IV changes with the stock price but meme stocks are especially sensitive.
A bull call spread benefits from an increase in implied volatility (IV). When IV is low and expected to rise, it can be a good time to initiate a bull call spread
That’s only true if the stock price is near or below the long call strike, or fallling. If the stock price is rising towards/through the short call strike, the position flips vega negative and benefits from decreases in IV
it would be the same as the “short” IC graph except invert the long/short strikes and P/L axis. So IV contraction with the stock in between the long strikes (dotted lines) would lead to losses, etc
@@projectfinance Got it. So a Long IC is similar to a long bull call spread in a sense, it's beneficial with a high IV if price is in between the long strikes or low IV if price is outside the short strikes on call/put side?
@@Nice-Y Right. It would be the combination of a bull call spread and bear put spread (both included in the video). Your statements are correct. If either spread in a long IC becomes fully ITM it is more beneficial to see IV fall (more common if the stock price is rising). If the stock is in-between the long strikes then an increase in IV is beneficial.
@@projectfinance Thanks to your videos, Long IC has become my go-to strategy whenever I think the price is at a pivoting point and/or before earning calls.
Wait Wait. Go to 5.00 and check what you said. you say if we buy a call option when the IV was 20% and then it starts to increase. You are saying we will be profitable ? Hold on... Are you saying when price increases the IV increases ? Please clarify
I am saying that if you buy a call at 20% IV and then IV increases, you will be profitable on the call option because, all else equal, an increase in IV means the options are more expensive. So if you buy before that price increase happens, you make money. www.option-price.com/ Check out this website and play with the numbers. Hold the days to expiration the same and increase the implied volatility. See how the option price goes up.
@@projectfinance I did, thanks. Now in that option calculator they ask for underlying price and exercise price. What should I input. For an example my favorite option is SPY. Should I just add the current price for both fields ?
That is a strategy, though buying options when IV is low doesn't necessarily mean IV will increase during your trade, though some traders do prefer to buy when IV is low in case it increases. It is surely a better strategy when it comes to buying puts on an index like SPY because IV explodes higher when the market crashes. So if you buy puts on SPY when the VIX is low (
Is this idea too simple? Short options when Implied Volitility is greater than Historical Volitility. Go Long when IV is less than Historical Volitility.
It is too simple because you have directional risk when you buy/sell options unhedged. It is a sound foundation for buying/selling options, but not an entire strategy on its own.
These concepts actually apply there too except at warp speed! An option reaching 0 time to expiration is like implied vol falling to 0% (since the closing stock price becomes certain). Planning to do a video on 0 DTE trading soon
Get the slides to this entire presentation included in my new 170+ page free Options Trading for Beginners PDF: geni.us/options-trading-pdf
Love the presentation and whole explanation of IV! Thank you!
Finally, a video that makes understanding Implied Volatility simple. Thank you!
This is a masterpiece. I love your presentation so much. You make a confusing topic to be more clearer. Thumbs up!
Wow! Glad you think so! Thanks for your feedback/comment! I appreciate it.
Man one of the best channels you talk slow explain in depth give free game so when I go to spend my money on education I’m coming here
Thank you!! Happy to help
Truly the best video on youtube for IV explanation and it also aged well based on the last (bonus) segment
Glad it was helpful! Haha I need to do a separate video on that last section
so with that same very last scenario, wouldn't it be best to sell a call when the stock and volatility are going up?
Great explanation with details on implied volatility ❤
Thank you for always providing great content
The visual presentation at 2:40 is excellent! Would love to see another video with that comparing historical IV vs. the actual moves of each stock! For example, how much more 'inaccurate' is a 50% higher IV and is that alone strategically tradeable?
Your content is amazing, and the PDF is also very insightful (as an option trader with both academic and market experience I am claiming this). Keep it up!
Fantastic video as usual Chris! I took the liberty of counting the 79 times that you said the word "Implied Volatility". Hope you are having a great day! -Evan
Thanks Evan! Haha thank you for the IV stat! I hope you're well.
Dude i watched a past video. Not sure what day it was. But bro! This helps a lot!
I love your content. Your explanations and examples are easy to understand. Thank you for posting. Keep up the great work that you do. Cheers from the Philippines 🇵🇭
Thank you for watching and commenting! More to come!
Insightful overview of Implied Volatility! IV gauges market expectations, and realized stock volatility deeply influences it. A rising IV hints at market swings, while a dip suggests stability. Notably, from an AI-driven trading standpoint, IV emerges as a key factor when selling options.
Thanks a lot! I needed this info on IV to make better trades.
You're welcome. I'm glad this video helped!
Professor Chris ! You tell it like it is bro for this infant beginner trader and appreciated
Marques
Great explanation on IV, really really enjoyed how you explained it. Defintately subscribing to your channel. Great work!!
From india, salute to you bro❤❤
Leaned a huge amount! Now I understand IV!
Really appreciate everything you do! Super helpful.
Great video sir I knew there was more to options then just buy call or buy put thank you
Great video Chris is not a joke like those clowns on You Tube, they think they know it all. Keep the good work up. Thank you, Chris again for the efforts that you put into those videos to educate us.
Well explained concept of IV
Great content and presentation!
Thank you!
wow... that was explained so well... thank you
Wonderful! Thank you!
great content! btw at 10:49 for short straddle the chart title still says "190 Short Put" instead of "200 Short Put"
Great information. Very educational and easy to understand.
Glad it was helpful! Thank you for commenting
Very helpful. Thank you.
I had this exact scenario happen to me on a trade today where i was right about the market move down and my PUT still lost money. very frustrating but i appreciate the explanation.
Thank you Chris
Thank you so much for the value you're giving Chris, you've helped my trading a ton.
I love to hear that! Thanks for watching and commenting! I appreciate it.
So I have a question when trading close to expiration options what should be the standard rule or metric when buying either puts or calls can you make a video about that or explain briefly thank you
You are simply AMAZING!!!
Thanks so much :D
Thank you for your video; do you any coaching?
Your videos are great with the visuals … A+
Thank you! I just spent a ton of time creating an Options Trading for Beginners PDF (170+ pages now) that includes my best explanations/visuals explaining key options trading concepts and strategies. Check it out: www.dropbox.com/scl/fi/g7d402wnapqexq344ct73/options-trading-for-beginners-aug15-v1.pdf?rlkey=dort61xyaz1rubndbwbqmhd5i&dl=0
If you want updates to the PDF over the coming months/additional learning resources, consider dropping your email on the page here: geni.us/options-trading-pdf
what service you use on 2:28 minute?
So you should open call or put credit spreads when volatility is high, in hopes that they drop afterwards?
Thank you for the great explanation, I have a question. I saw most of your educational videos but never touched the gamma exposure level, Is the GEX something important to rely on, or is it a kind of myth
The main question is how do you measure IV? How would you say IV is expensive or inexpensive? I use Think or Swims Historical IV line and generally say if IV high relative to where it has been. How do you measure IV to decide if IV is high and I should not buy an option or IV is very low and it would be a good idea to buy an option???
Thanks a lot are you and Mike Butler from Tastylive brothers?
what software did you use for your presentation? animations and transitions and such.
It's all custom animations in Adobe After Effects. I do the data/graphics in matplotlib (Python plotting library) and then have the charts animated.
So how do you tell if Implied Volatility is high. IV rank or IV %tile? or a combo of both? For example if IV %tile is 93%, and IVR is around 30- does the underlying have high implied volatility?
Great video.. Follow up question: What makes the underlying positively or negatively co-related to its IV?
Hi Chris, thanks for the great video - do you still offer the index options seller course?
Great content
Thank you! I just spent a ton of time creating an Options Trading for Beginners PDF (170+ pages now) that includes my best explanations/visuals explaining key options trading concepts and strategies. Check it out: www.dropbox.com/scl/fi/g7d402wnapqexq344ct73/options-trading-for-beginners-aug15-v1.pdf?rlkey=dort61xyaz1rubndbwbqmhd5i&dl=0
If you want updates to the PDF over the coming months/additional learning resources, consider dropping your email on the page here: geni.us/options-trading-pdf
I just started learning about option trading but this is so confusing to me still I’m going to have to watch this over a few times
Pls make a video on difference between iv ,vix and Vega
Can you please comment on the company compass pathways, i am looking at 2024 may , but volume is low and obviously in the money like you said . Thank you
What about volatility about a line that is not horizontal? If there is a reduction in volatility, the price wouldn’t stop changing…but its direction would become more predictable, which could either be a profitable direction or not. I guess you would have to rotate the basic graphs that are being combined to get the others
Love the data analysis graphics? Would you mind sharing what tools and applications you use for the graphs
I use Python to do the data analysis and use matplotlib (python library) to create the graphs. Then I work with a video editor who animates them. I believe in After Effects
how often does it happen when IV goes from 30% to 10% (or vice versa) after you made a trade?
That would be a large move for sure and not common in most instances. In SPY, we could easily see a 20% IV to 30%+ IV in a market downturn, and a similar drop in IV from the bottom of a market drop into a rally.
The big IV moves were to illustrate the changes in strategy profitability at various stock prices. Also, the passage of time has a big impact on strategy performance as well, which would add to or offset the discussed changes in IV in the video.
Great content Chris your explanations were easy to understand as they help me form relationships in my head. Keep it up keep them coming 💯
Awesome! I'm glad to hear the video helped you out!
With the example of being right directionally, but wrong with IV (@16:00min), all thing being equal, would a trader not close the position when the stock price fell below the strike price (presuming they had already at least broken even)?
One other question, do you have a rule of thumb when it comes to entering a trade? Would you disregard something if the IV is below a certain amount?
P.S., I like your style ;)
So if I have a long call ITM, I actually want to see an increase in IV more than an increase in the stock price?
Can you please do a video about IV term structure
Hi, I watched most of your videos, here I am confusion by your telling that if IV increases price for a call will increase
If I'm not wrong iv increase (i.e: VIX ) increases stock falls and iv falls stock goes Up
Pls if possible clarify my doubt any one who is reading my comment pls explain
So implies volatility only works in one direction? Dosent volatility work separately for each stock relevant to that stock
Implied volatility is both directions, but option prices can 'skew' to one direction (OTM calls much more expensive than OTM puts at equidistant strikes, or vice versa).
A stock's realized volatility (sometimes called historical volatility) will impact a stock's option prices (implied vol). Higher realized stock volatility will lead to more expensive option prices (higher implied vol), and vice versa.
Every stock has its own level of realized volatility and therefore implied volatility.
@ thank you for that excellent answer and response time I’m still watching right now learned a lot
In my opinion, more often than not, spy and qqq strangles work. All you need is one side to go up over 100% which happens a lot woth high strike prices.
God stuff here brother thank you for sharing! 👍💯💯💯💯
Thank you! I just spent a ton of time creating an Options Trading for Beginners PDF (170+ pages now) that includes my best explanations/visuals explaining key options trading concepts and strategies. Check it out: www.dropbox.com/scl/fi/g7d402wnapqexq344ct73/options-trading-for-beginners-aug15-v1.pdf?rlkey=dort61xyaz1rubndbwbqmhd5i&dl=0
If you want updates to the PDF over the coming months/additional learning resources, consider dropping your email on the page here: geni.us/options-trading-pdf
thank you!
You're welcome, thanks for watching and commenting!
I have a question. Does the change in daily stock price affects the IV or the change in IV affects the stock price? Who decides the IV number?
The IV number comes from a broad basket of options in each expiration cycle (each expiration has its own IV calculation). As traders we buy/sell options, and the supply/demand dynamics change the option prices. The option prices go into the IV calculation, so it's the changes in the option prices (which reflect stock price movements/volatility expectations/economic expectations/etc) that drive changes in IV.
You could also argue though that IV levels change options trading behaviors. For example, super high IV might lead traders to become more hesitant of buying options and more willing to short options, driving option prices and IV lower.
Thank you for your explanation.
What is meant by "meme" stocks?
Wikipedia definition: A meme stock is a stock that gains popularity among retail investors through social media.[1][2][3] The popularity of meme stocks is generally based on internet memes shared among traders,[4] on platforms such as Reddit's r/wallstreetbets.[5] Investors in such stocks are often young and inexperienced investors.
I've been directional right on AMC , and its IV burned the money paid even though I bought it ITM and correct on the price move....
Probably super common on meme stocks that experience big IV changes as the stock price moves. Most stocks won’t experience massive IV changes with the stock price but meme stocks are especially sensitive.
Selling call credit spreads would have also been a strategy to make a directional bet, however it would also allow you to benefit from the high IV
Sell atm or itm option spreads
A bull call spread benefits from an increase in implied volatility (IV). When IV is low and expected to rise, it can be a good time to initiate a bull call spread
That’s only true if the stock price is near or below the long call strike, or fallling. If the stock price is rising towards/through the short call strike, the position flips vega negative and benefits from decreases in IV
Nice nice very nice
What about a Long Iron Condor?
it would be the same as the “short” IC graph except invert the long/short strikes and P/L axis. So IV contraction with the stock in between the long strikes (dotted lines) would lead to losses, etc
@@projectfinance Got it. So a Long IC is similar to a long bull call spread in a sense, it's beneficial with a high IV if price is in between the long strikes or low IV if price is outside the short strikes on call/put side?
@@Nice-Y Right. It would be the combination of a bull call spread and bear put spread (both included in the video). Your statements are correct. If either spread in a long IC becomes fully ITM it is more beneficial to see IV fall (more common if the stock price is rising). If the stock is in-between the long strikes then an increase in IV is beneficial.
@@projectfinance Thanks to your videos, Long IC has become my go-to strategy whenever I think the price is at a pivoting point and/or before earning calls.
But iron condors in high volatility stocks
You're making one small subject in a bunch of trading subjects like calculus.
Please provide the PDF on teachable for those of us, that bought your course.
Thanks for this suggestion! I am uploading it to the beginning of the course now.
Wait Wait. Go to 5.00 and check what you said. you say if we buy a call option when the IV was 20% and then it starts to increase. You are saying we will be profitable ? Hold on... Are you saying when price increases the IV increases ? Please clarify
I am saying that if you buy a call at 20% IV and then IV increases, you will be profitable on the call option because, all else equal, an increase in IV means the options are more expensive. So if you buy before that price increase happens, you make money.
www.option-price.com/
Check out this website and play with the numbers. Hold the days to expiration the same and increase the implied volatility. See how the option price goes up.
So in other words is it good to buy options with low IV ? Why ? because the IV in this case can only go higher ? Correct ?
@@projectfinance I did, thanks. Now in that option calculator they ask for underlying price and exercise price. What should I input. For an example my favorite option is SPY. Should I just add the current price for both fields ?
@@projectfinance ok, agreed. So the lesson here is never buy calls when IV is 50% or more ?
That is a strategy, though buying options when IV is low doesn't necessarily mean IV will increase during your trade, though some traders do prefer to buy when IV is low in case it increases. It is surely a better strategy when it comes to buying puts on an index like SPY because IV explodes higher when the market crashes. So if you buy puts on SPY when the VIX is low (
Obligatory appreciate comment for the algorithm
👌
👍🏼👍🏼👍🏼👍🏼👍🏼😎
Good stuff man… can I just give you my cash and you make it do something
🤑
Is this idea too simple? Short options when Implied Volitility is greater than Historical Volitility. Go Long when IV is less than Historical Volitility.
It is too simple because you have directional risk when you buy/sell options unhedged.
It is a sound foundation for buying/selling options, but not an entire strategy on its own.
zhina！
0dte spy every day
These concepts actually apply there too except at warp speed! An option reaching 0 time to expiration is like implied vol falling to 0% (since the closing stock price becomes certain).
Planning to do a video on 0 DTE trading soon
Thankz