sjoptions (November 30, 1999 at 12:00 am)

Hi, just something to add for the readers....if you use Think Or Swim, then you can simply login to their software, go to the Analyze Tab, then click on Volatility Analysis and you'll see the smile this trader is talking about. We have to have a smile here to balance out the Vega Frown.

dominicleung87 (November 30, 1999 at 12:00 am)

Another thing to add is that you can short the butterfly/condor as well as long them to create positions which could benefit from either a rise or fall in realized volatility. Implied volatility also isn't the same across all options. Different expiration dates have different IVs, different strike prices (even keeping expiration the same) also have different IVs leading to what is called the "volatility smile" where ATM options have lower IVs than ITM or OTM options.

dominicleung87 (November 30, 1999 at 12:00 am)

Uh Few things to add, implied volatility is simply the volatility that's calculated based on the market price of the option. In other words given that a Call/Put is X dollars and all other inputs (time to expiration, risk free rate, etc.) known, the volatility is ___. Implied volatility is not historical volatility (the historical calculated variance of the underlying asset). Implied volatility is what traders/investors/etc "think" the future volatility of the asset will be.

cassidy1478 (November 30, 1999 at 12:00 am)

good info, thanks

navtel (November 30, 1999 at 12:00 am)

huh??