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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 ...
Implied volatility can be a confusing concept for investors who are just starting to trade options. While the idea of volatility is easy to understand, trying to estimate it is more difficult. ...
If an option is held as part of a delta neutral portfolio (that is, a portfolio that is hedged against small moves in the underlying's price), then the next most important factor in determining the value of the option will be its implied volatility. Implied volatility is so important that options are often quoted in terms of volatility rather ...
To an option trader engaging in volatility arbitrage, an option contract is a way to speculate in the volatility of the underlying rather than a directional bet on the underlying's price. If a trader buys options as part of a delta-neutral portfolio, he is said to be long volatility. If he sells options, he is said to be short volatility. So ...
[citation needed] On March 26, 2004, trading in futures on the VIX began on CBOE Futures Exchange (CFE). [19] On February 24, 2006, it became possible to trade options on the VIX. [19] Several exchange-traded funds hold mixtures of VIX futures that attempt to enable stock-like trading in those futures. The correlation between these ETFs and the ...
A volatility exchange-traded fund (ETF) lets traders bet on an increase in the stock market’s volatility. It can be a highly profitable wager if the market suddenly becomes more volatile, for ...