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Professional: Volatility Trades
Volatility
Two main types of volatility: historical and implied. Historical is the standard deviation of the stock’s movement over some period in the past. Implied is the number that is inputed into the option calculation model which is attributed to extrinsic value. If volatility increases then the value of the calls and the puts increase. When volatility decreases, both call and put values decrease in extrinsic value. So over time it will fluctuate but it tends to fluctuate around it mean. Implied volatility has been used to describe the fear or uncertainty in the market, the more fear, the higher the implied vols, thus the higher the option prices. Implied volatility usually reverts to a mean price..
Who the Service is For
This corner is designed for trades that focus on volatility. This corner is NOT based on directional stock movements. This is based on the understanding that options have implied volatility that fluctuates. We like to take advantage of volatilities that are extremely high or low. Also when one month is out of line with another month( time skew). There will be other times where we will take advantage of the strike skew is out of line.
Which Strategies Will be Used
This corner will use multiple strategies, including: diagonals, time spreads, butterflies, condors, iron condors.
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