Implied volatility readings have a direct impact on the price of option contracts and are thus important metrics tracked by options traders. Several other market participants analyze and pay close attention to implied volatility as well seeing that useful insight that can be garnered and incorporated into a trading strategy.
High implied volatility indicates there is a greater chance of large price swings expected by traders whereas low implied volatility signals that the market expects price movements to be relatively tame. Implied volatility measurements can also help traders gauge marketImplied volatility measurements can be incorporated into various trading strategies as well. This is due to their usefulness for identifying potential areas of.
In other words, the calculated 24-hour trading range reflected a 1-standard deviation implied move of Arguably the most popular implied volatility benchmark is the S&P 500 VIX Index. The VIX Index typically rises amid turbulent market conditions and increasing uncertainty, though the ‘fear-gauge’ tends to soar during aggressive selloffs in stocks. In turn, the VIX generally holds a strong inverse relationship with the S&P 500.
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