Chapter 4 Volatility

The most important part of trading options is to understand volatility. More often than not volatility, or ‘vol,’ is presented as a theoretical concept. If XYZ option does X, then what happens to Y? However, what you need to understand is that volatility is the most important part of recognizing a good trade. If you are able to fully understand the concept of movement (realized vol) and perceived movement (implied vol) you will be able to better distinguish a good trade from bad. In this chapter, I will discuss the zones in which the underlying and options trade. Additionally, I’ll talk about how each zone has its own characteristics, levels it trades within, and its general effects on the trader. If you need to brush up ...

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