Implied Volatility Explained: What Drives Options Pricing
Review how implied volatility reflects the market's expectation of future stock movement and why it often falls sharply after earnings or other major announcements.
0:00 Introduction: Implied Volatility Crush
0:22 Pricing the Unknown Before Event
0:47 Once Known, IV Tends to Drop
1:30 Event Trading Defined
1:47 Using Straddles and Strangles
2:00 IV Definition and Pricing Models
2:25 Each Strike Has Its Own IV
3:00 Crowdsourced Market Pricing
3:38 Bid-Ask Spreads Example
4:07 Your Order Impacts IV
4:33 IV: Forward-Looking Metric
Register to view the complete Beyond Directional Thinking: Understanding Straddles and Strangles webinar: https://bit.ly/3S57jdZ.
Recommended Videos
Introducing the Greeks: Your Options Dashboard
Learn how Delta, Gamma, Theta and Vega each map to a component of a car's dashboard — speed, acceleration, fuel and weather — and why tracking all four is essential to understanding what drives an option's price.
Watch Now
Netting the Greeks
"When we turn a short option into a spread, we are reducing our profits, but we're also reducing our losses." Learn the significance of the Greeks in this hypothetical scenario.
Watch Now
5 Options Greeks for Next-Level Traders
When you understand the value of options Greeks – and the benefit they can bring investors and traders – you’ll be taking the next steps towards a better understanding of how options can work for you.
Watch Now