IntermediateMAD Academy0:46Derivatives

The Move the Market Has Already Priced

Implied volatility converts into a dollar range, and that range is the bar your trade has to clear rather than the direction.

0:46 · 6 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00Options already price a move. Yours has to beat it, not just happen.
  2. 0:05What implied volatility is. The volatility that makes the model agree with the price people are actually paying.
  3. 0:14Turning it into dollars. A rough approximation converts it into the range the market expects by expiry.
  4. 0:23The earnings trap. Implied volatility rises into the event and collapses immediately after it.
  5. 0:33What that means in practice. The stock has to move more than the priced range for a long option to pay.
  6. 0:41Compare your expectation with the range already priced.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
The Move the Market Has Already Priced — MAD Academy Training Video · MadStockAlerts