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Implied volatility is a powerful but often misunderstood metric that plays a major role in options trading. Implied volatility doesn’t tell you what’s going to happen to an option’s price ...
Use screening tools at your options broker to identify options that exhibit above-trend implied volatility but that may be strong long-term stocks. 5. Buy calls on dividend payers
When trading stocks or stock options, there are certain indicators you may use to track price momentum. Implied volatility, which measures how likely a security’s price is to change, can be ...
For example, assume a call option is trading at $1.90 with the underlying's price at $45.50 and is yielding an implied volatility of 17.5%. A short time later, the same option might trade at $2.50 with the underlying's price at $46.36 and be yielding an implied volatility of 16.5%.
The dashed blue line shows the combined value of the position some time before expiration and when there exists significant implied volatility in the options. The put backspread is a strategy in options trading whereby the options trader writes a number of put options at a higher strike price (often at-the-money) and buys a greater number ...
A call option is trading at $1.50 with the underlying trading at $42.05. The implied volatility of the option is determined to be 18.0%. A short time later, the option is trading at $2.10 with the underlying at $43.34, yielding an implied volatility of 17.2%.
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