Remember, we trade in the world of probabilities, not possibilities. But how do we know what is reasonable or probable? Implied volatility gives us the answer. Click the video below to find out how Follow me on Twitter @MikeShorrCBOT
Read Article
Implied Volatility (IV) and Vega are very much related but are by no means the same thing. Implied volatility has no direct correlation to actual past historical or statistical volatility; rather it is a measure of predicted future movement. Implied volatility tends to increase when there is uncertainty or anticipated news, while it tends to […]
Read Article
An option’s gamma is a measure of the rate of change of its delta. The gamma of an option reflects the change in the delta in response to a one-point movement of the underlying stock price. Like the delta, the gamma is not a static measure. It is constantly changing, even with tiny movements of the […]
Read Article
Rho is the rate at which the price of a derivative changes relative to a change in the risk-free rate of interest. Rho measures the sensitivity of an option or options portfolio to a change in interest rate. Rho may also refer to the aggregated risk exposure to interest rate changes that exist for a book of several options positions. For example, […]
Read Article
Today is a great day to talk about the VIX. It can be confusing. The VIX index and futures are connected by a statistical relationship that depends on how fast the VIX tends to move toward its average level, the volatility of the index and how much time is left until expiration. Near expiration, the […]
Read Article
Twilio (Ticker: TWLO) along with a lot of tech stocks got slammed today. At mid-day, it was down ~6%. But, there was no outside fundamental driver and in that absence, we turned to look for technical support. Take a look at the chart: Look where it found support. Right at the 50-DMA as we had […]
Read Article
When an option is converted to an underlying stock position, there are two categories, exercise and assignment. An options assignment, you have no control over. This happens when you are short an option (or short a leg of an option spread) and the buyer of that option exercises his or her right to get long […]
Read Article
We use the PTA Options Trading Tool constantly during the trading day. What is it and how do we use it. Click the tutorial video below to find out: Follow me on Twitter @MikeShorrCbot
Read Article
Implied volatility is a metric that captures the market’s view of the likelihood of changes in a given security’s price. Investors can use it to project future moves and supply and demand, and often employ it to price options contracts. Implied volatility is not the same as historical volatility, also known as realized volatility or statistical […]
Read Article
“Gamma Scalping” is a concept that retail options traders should know about, but frankly will rarely, if ever, use. Not because it is a bad idea, but because it is capital intensive and it’s necessary to own the underlying asset. “Gamma Scalping” involves the process of scalping in and out of a stock or futures […]
Read Article
