Implied Volatility Explained (The ULTIMATE Guide)

[@projectfinance]

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf

[@Eastbaypisces]

i dont understand how u get the calculation for it? like how d they come up with 68% probability and all?

[@paysev6256]

Your content has insanely good quality. I am not getting why you only have 95k subs. Thank you for the work you put in!

[@trevorsvandrlik9104]

I've been watching options videos for 2 years, and just today I finally feel like I have an understanding of IV!!

[@projectfinance]

Yes! That was the goal of the video! I'm glad to hear it was helpful. -Chris

[@vakeesanmahalingam4078]

@@projectfinance great job on the video!!!... What I find confusing is the constant use of the term implied volatility throughout the video... I think you mention it in full like over 200 times... For future videos you should just say you'll be referring to implied volatility as IV and then explain it like you did... It would make it a lot easier to follow without constantly saying volatility every 2 seconds for 30 minutes Great video though!!! Tons of value!! Finally feel like I have a grasp on IV but I disagree with what you mention about IV and earnings. Many ppl profit trading based IV rank and IV during earnings, selling option strategies like iron condors.

[@YamahaC7SRG]

Great video! Thanks! Just saw it today and wanted to comment that people shouldn't stress too much if they don't follow the math of IV. IV is 'implied' because it is estimated assuming Black-Scholes is valid and working backward from actual trade data to calculate volatility from the B-S model. The problem for me is that I believe B-S is fatally flawed and IV is, thus, not very useful. As Nassim Taleb asserts, prof. traders use advanced rules of thumb that they learn over years of experience to trade options successfully. Newbies (and those adept at math) tend to treat the Greeks and such calculations as Gospel from Above and blindly rely on them for decisions without understanding what they're really doing and the severe failings of B-S. It is probably better not to worry much about a given IV calculation because the figure can be wildly wrong, right when you need it the most. Rather, study the CONCEPTS underlying options and the all Greeks and start out trading options very slowly by paper trading and then doing small, real trades to see how things work in the Real World. A successful mentor is invaluable.

[@robertocfaguiar]

I like your comment a lot. I have just started studying options and have just traded paper. I don't know all the math yet, but my feeling is exactly what you have said above. Would you be so kind as to recommend a book where the concepts are easily explained and make the case that, Greeks and IV, have to be seen in another dimension, in order to make a better choice when trading options? Thanks.

[@stephenglazer4224]

I have heard the same. I am no expert but from what I understand the IV is calculated by back solving for V in the B-S model by using actual option prices and SP moves. Many say that the B-S model itself is fatally flawed. In any case I recently bought a few Google Puts with two year expiry dates and a strike price of @135. Each cost $1710. I won't go into my full bear case for google but I do think the options are cheap. The same call option costs twice as much. The stock has traded as low as $88 already this year and its only a few dollars away from it's all time high. Even if there is just a 20 - 25% overall market drop in the next two years that will be more then enough to cover the trade.

[@me4901]

@@stephenglazer4224 B-S was written for European style options which can only be exercised at expiration. American style options can be exercised at any time. . So there's differences there. I haven't had enough experience to know exactly how much that difference matters, but it is worth knowing.

[@jerrynix5206]

This is definitely a video I'll be watching several times, alot to take in wow. Thank you!

[@projectfinance]

It sure is! Lots of stuff here but don't worry about memorizing it all. The basic meaning/representation of IV is the most important part to understand. Thanks for the comment, Jerry! -Chris

[@mathlivernois1609]

@@projectfinance Why not use 252 instead of 365 to calculate a stock price range for a certain time period since we just have a 252 trading day

[@LeMuseHere]

This impled volitlity video on implied volitility is the best implied volitility, and most thorough implied volitility video on impied volitility I've yet seen on implied volitility.

[@leejmuam1]

🤣

[@julioc4978]

The best video I have ever seen about Implied Volatility! Thank you! I now see why some people use the bollinger bands to trade and also why they work,

[@projectfinance]

Thanks for the comment/feedback! -Chris

[@Eastbaypisces]

what are bollinger bands?? i heard that before

[@ecast1500]

I saw this video but did not watch until now, 10.09.21. It shed a bit of light on what I was actually seeing. I was following F (ford) when it was trading between 14.00 and 15.00. The options for calls and puts were low for a stock at that price. I looked at other stocks at that price and the option prices were way higher. This video gave me an idea on why. Ford was trading in a range for a long time. Now the trick is to find out what to do with this knowledge, good luck to all

[@ThePhinista]

Thank god I actually paid attention in that one stats class, makes this so much easier to follow.

[@rswatashi]

I really got a great information from your session. I'm going to work on analysis of stocks on Excel based the totally different observations from you. Thank you.. Btw, when you talk, your face looks like smiling always. It's a god's gift. God bless..

[@theoreticalexercise]

Wow. Clearest explanation of IV Rank vs IV Percentile ever. Very concise. Thank you. I have changes to make

[@2-InfinityNBYND]

Man, you’re awesome at explaining options. Thank you for these videos! 🙏

[@Tpartee3]

Your channel is so professional and easy to comprehend the information. Thank you

[@njperuviankid]

God bless brother. I just wanted it for the first time. Will def watch it at least two more times. Thank you

[@samuimuscle]

This is not the first time I watch the VDO the more I watch plus observing the market in the brokerage platform the more I understand. Great job Chris!

[@jeffreymelendez]

Awesome video, Chris. I've learned more about IV in the 29 minutes and 50 seconds than I did in the last year studying IV.

[@projectfinance]

Amazing! That’s what I like to hear!

[@dynamic9679]

dude that's so dense.

[@me4901]

I super appreciate this video. I was looking for a good explanation of implied volatility that includes the statistics side and this is great.

[@bbwphantom]

All your videos are the best explanations I see anywhere. Everything is broken down and explained.

[@projectfinance]

Thank you so much! I appreciate it. -Chris

[@tastysti]

The implied volatility of me understanding this video is high. Just subbed 🚀

[@atomize]

Your explanations are so clear and perfectly devoid of any hype or conversational fluff - the generated Closed Captions are nearly perfect =) - Tip for other lazy viewers like me: Save the transcript for this video (and any where the articulation is so consistent) for some instant reference material that doesn't require re-watching the video 1000 times. Use the three dots by the bottom right corner of the video player and do "Open transcript". Boom, the notes you were never gonna take =)

[@projectfinance]

Thanks so much for watching/commenting!

[@markc5771]

Excellent idea!! Or if you're someone like me that remembers better from writing out the notes, definitely do that. I do that with all his vids

[@sudhirpatil3434]

It is complex sub to understand - i will have to watch a few more times just to make myself understand.... Thx for your genuine efforts!

[@embracevanity9871]

I was avoiding this video bc of its length but am so glad that I engaged. You are so incredibly good at explaining how things work in the simplest of ways. Thank you!

[@son_gokhan148]

How are u doin now

[@DBraun-uj8ir]

I'm new to options and will watch this again, but at the 2:42 minute point of your presentation you show a slide comparing Buying and Selling pressure to implied volatility. My question is this: Wouldn't a prior dramatic move DOWNWARD (selling pressure) also increase IV?

[@skyred289]

Thanks Chris.. understood a lot from your explanation..

[@shutupavi]

who TF downvotes such amazing content?!?!?

[@jakobafeworiki1006]

i have gain so much value from u thank u so much u realy are the best at ur profission

[@guyredares]

Thank you. best option videos on KZbin by far

[@projectfinance]

I really appreciate your comment! -Chris

[@henishfrancis6058]

All your videos are very informative , appreciate your step by step teaching method and the tools that you use for that purposes. I appreciate all that you do and expect more videos from you in the near future. Thank you again!!!

[@spacecat556]

I understood everything in the video, except for the last part of earnings Will have to rewatch it many times i think

[@emmanuelnsoedo5505]

chris you are a great teacher and thank you.

[@vital4644_]

Dude this is good information. Wish i knew more!

[@supanova4126]

Question for anyone here. At 2:50 on the chart it says selling pressure decreases options prices therefore lower IV. Why? Doesn’t IV measure +/-? Why would downward prices be any different? Isn’t IV supposed to measure volatility in prices up or down? Thanks

[@jakobafeworiki1006]

u realy are amazing u are the best teacher i have ever had i realy apprite u and all ur vids, and i realy hope u becoume even bigger then ur are and wish u all the best brother

[@lost70s]

I watched about 75% of the vid .. when I first heard you say .. you will be and expert .. I though ok more bullshit ... but still listened . I was impressed ... this was an excellent vid on IV .... when I saw that you showed TW platform I thought well this is a Tom Sosnoff production and I still wonder ... BUT you also figured out that IV Percentile is better than IV Rank ... again I was impressed . Most just fall to the ground to worship all that Tom Sonoff says and he is dead ass wrong that the IV Rank is better . And Dr. Data showed it in a vid but dare not tell the king he is wrong . I am a fan of Don Kaufman ( have listened to him for years on the Swimmlesson chat room in TOS and have copied many of his presentations from there ) and Don is sharp and does a good job explaining options and IV . For concise brevity with a lot of infor .... I think you beat him here . Not an easy task . Shame that you don't use the TOS platform as it is superior to TW for options and data and projection . In the past when people ask were can I go to learn options I most of time point them to Theo Trade - Tasty Trade some ... I'm going to point them to you here too . Hoping you do as good a job on the other subjects . IF >>> IF your other vids are as accurate and concise as this . You have got a killer program going here . I could not have done it better .. but that is not saying much . I must admit that in the back of my mind that I think you are produced by Tom Sosnoff ... but it's only a gut feeling and I can be very wrong . Thanks ........

[@projectfinance]

Thanks for the comment/support! I did work at TT a while back, but I have developed my own trading philosophy and way of explaining options. -Chris

[@Dougie1969]

Lost70s Sounds like you're no slouch on the options subject, you've clearly done your homework. I don't believe Chris is beholden to anyone though, I'm just saying, this guy has helped me a LOT. When I started off buying stock a couple years back , I'm ashamed to say I burned through 1000s.. Now I listen to people like Chris, I won't say I'm getting rich, but I can say I don't lose money anymore. I recently started using options, and love it, just definitely need to learn patience.

[@lost70s]

@@projectfinance LOL I think it 's the production format that made me think you were with him thanks LOL

[@padmansundar3425]

IV explained very well with good examples! helped in practical application which most videos on this subject do not do! Thanks a lot!

[@fminc]

Thanks For your time Chris. This was very interesting and valuable.

[@GapBahnDirk]

This is such a good resource for options traders. Please continue with educational videos Chris!

[@projectfinance]

Thank you for the continued viewership! I don't plan on stopping.

[@gemini22581]

@@projectfinance you are touching our lives everyday with your knowledge and effort. Thank you so much for taking the time to do this. I have subscribed!

[@jasondillon2567]

Dang, this is such useful information, presented in a very understandable way. Thank you!

[@colybwoy]

Great video, this is a wonderful resource to archive and return to for a refresh.

[@bozzicone]

That was hard! :-) you're just great ..... I think I have to listen this video a lot of time 🙂 thank you.

[@MaxxerG]

I’m binging all of Chris videos

[@monsheet]

This video is such an eye opener. Awesome, Buddy!!

[@sahidycastillo5565]

Thank you for sharing your knowledge with us. It was very helpful for me since I just recently started option trading. Blessings

[@projectfinance]

You're welcome and thank you for watching/commenting!

[@lliang9838]

Another educational video, Chris! Thanks for the clear explanations. One concept that I am confused on is "How come those options that are expiring shortly after earnings report do not decay as they normally would?" Thank you for your time!

[@andis9076]

U mean earning on Friday morning?

[@me4901]

They aren't decaying because people are still expecting a big move on earnings day compared to a non earnings day. They believe if there's only one day to make a really big move, it could be done

[@admiralknnight5779]

EXTREMELY WELL EXPLAINED TOPIC OF IMPLIED VOLATILITY. I HAVE 2 QUERIES FOR YOU IF YOU COULD CLARIFY, PLEASE...1) DO YOU HAVE A METHOD OR CAN YOU SUGGEST A METHOD TO GET TO THE FORMULA TO CALCULATE THE IV PERCENTILE, VIZ. THE NUMBER OF DAYS FOR THE NUMERATOR THAT THE IV WAS BELOW THE CURRENT IV. 2) EXPECTED PRICE MOVE FORMULA... ARE BOTH OF THESE AVAILABLE ON ANY PLATFORM OR DOES ONE NEED TO CALCULATE THIS EVERY TIME? WOULD REALLY APPRECIATE THIS, CHRIS....

[@nichen6966]

Thank you. Fantastic explanations of IV concepts in a practical understandable way.

[@projectfinance]

Thanks for watching and I'm glad you found it helpful. It's a tough concept at first, but after some thought it becomes more intuitive.

[@nichen6966]

projectoption Yes, as others have mentioned, will come back to refresh my understanding further. Thanks.

[@ANCOLLSantosa]

time stamp 23:30 is the formula, right? I cant find it calculating with SPY and SPX.. please help. i think something wrong with the formula.

[@Myopinion23]

Great video!!! Very in-depth

[@shockerdcr]

Great video., but at 23:50 I’m guessing you meant to say 164 day not 180???

[@marifhossain]

Blink man blink! You are giving me a goose bumps! :-)

[@ericwright1668]

Hello, at time stamp 4:50 you scroll up and say how we arrive at the implied volatility. Can you please explain that more? I have never understood what those numbers mean specifically the percentages correlation to the dollar amount. Thank you

[@stonathanjokes2142]

Constructive feedback. Sometimes I have trouble with the vids for use of terms that aren’t defined. In this video its straddle. I went to go look it up, but this was supposed to be an ULTIMATE guide :)

[@Ilyakurishko]

Great video! You are doing great job sharing this content!

[@otosonet6693]

When the IV is based on the option price, it is different for each expiration time and for each strike. So what does the IV above the option chain mean, ... the item that always gives the same number for all options on some underlying asset?

[@zbhalaji]

Spot on! thanks for the good work team. Chris has made a nice narration. Thanks.

[@CWLong]

Another wonderful explanation.. and nice lounge music to end with.

[@routerpete1674]

Good video. So when I looking to long a stock for some immediate profits, how how do I predict the effects of a $1 move on the option price?? In other words, why wouldn't I always buy contracts that are just OTM and are cheaper than ATM contracts?

[@shivkuma100]

How do you intrepret IV >= 100% as seen on some super volatile names. The 1SD range would then include zero on the lower end. To be sure, this tends to be in near term options... longer term options had IV of 70-80%... Also out of money options had higher IV approaching or exceeding 100%

[@TheRealStevenAdams]

Great job explaining IV! Thanks.

[@ImPipkinrick]

thanks for the video. there's other really popular options videos, from other creators, that explained IV by using IV in their definition. they say, "it's the volatility that's implied[...]" lol what the heck.

[@beachthor1]

Ok this is more than I learned in my BBA degree.

[@midnight5597]

Do stocks that don't have options not have an implied volatility? Or is there an alternate way used to calculate IV for those special cases.

[@jalanubha]

Best Video on IV!! Thank you

[@PaulliMr]

Okay, watched it few times and I think I got it and all, BUT questions is, I'm looking to buy Option, there's an IV value there what does it tell me that option price don't?

[@genehawkins7516]

This guy is good!

[@projectfinance]

Thank you!

[@youngb.wiseman3576]

Another great video my man. Going to watch again like I do most of your videos. So much to learn! 😁

[@projectfinance]

I appreciate that! Thanks for watching and commenting. Let me know if you have any questions!

[@guyrozen4506]

Good video 👍 Where I can see IV rank? Which scanner or website you recommend?

[@gwentchamp8720]

Awesome video ! Trying to watch as many of your awesome videos as I can !

[@projectfinance]

Thanks for watching/commenting! I am glad you're liking the videos.

[@OtRatsaphong]

Very informative video, Chris, but one that i'll have to step through carefully to fully understand how to use IV Percentile with my options trading strategies.

[@dvirhanum9530]

I like your explanation. Very professional, comprehensive and straight forward! How can we support?

[@CarlosDuarte2007]

This video is gold!

[@projectfinance]

Thank you!

[@cyberjet2]

that was nicely explained, what I don't understand if the 1SD is higher and we expect bigger move with high IV why people always say at high IVR you sell premiums and buy them at low rank ?

[@breezefor5966]

Chris you are the man👍🙏

[@projectfinance]

Thank you! I'm doing my best.

[@ST-wx6vw]

How exactly all platforms including ThinkOrSwim calculate IV as a single value for a given expiration cycle is a misty to me. For example, there are number of Call and Put options with different Strike Prices for a given expiration cycle (say AMD that is 25 days out from today). Each row of this 25 days out option chain (on each side Call/Put) has its own IV ...which can be calculated from option pricing formulas. I have calculated that in Python and it works (matches). However, from all these multiple IV values, how do they come up with a single IV value for the whole expiration cycle is unknown. It appears that they take some weighted average but I am looking for the exact calculation that would work for any stack (any expiration cycle). Any inputs on this will be greatly appreciated. Thanks....ST

[@RogueTrader31]

The expected range formula doesn’t make sense, as it mixes prices, which are log-normally distributed with IV, which is the SD of log returns, which are assumed to be normally distributed. The formula works only as a first order approximation. The formula as shown here overestimates down movements and underestimates up movements as it mixes normal and log-normal distributions. Let's say I have a $100 stock with a 1-year IV of 200%. If the expected move for one year is +/- $200, then the down move could be negative, which doesn't make sense.

[@bsdgffishtuna5186]

So when i hear traders "sell the vol (volatility)" - what does that mean in terms of an actual trade? shorting a stock? buying a stock? ie GME vol is off the chart - well now what strategy do I do to capitalize on that?

[@bestonemusic]

The information you were giving in your video is skin deep. Jim Cramer would just say: sell sell sell!!!!!

[@projectfinance]

Is this a compliment or not a compliment? Hahaha either way thanks for watching!

[@MedusaStrong]

Is the implied volatility different for each option depending on the strike price and expiration date? If so, is there any correlation between the implied volatility of the underlying stock and the implied volatility of the specific option price? Does it mean that if the implied volatility is low for the underlying stock, all options for that stocks are having relatively low prices? Is there IV Rank and IV Percentile for each specific option or only for the underlying stock?

[@shadricosuave]

Good vid - but not easy to understand. Will need to watch again. Thanks for producing.

[@artiomkamincki]

Hi. Thank you very much for the video! Few people today provide information in such an accessible and understandable way! Cool! Can you please tell me where I can find a handy chart of implied volatility in the public domain? My broker unfortunately only provides average volatility...

[@warrengedye2888]

Very very very good explanation!!

[@basildog007]

Outstanding material!

[@projectfinance]

Thank you! -Chris

[@charitymonae5608]

You’re incredible for sharing this knowledge! Thank you🙏🏾

[@alariclau]

Good explanation!

[@alvinstephensii844]

I find your videos highly informative. The best in KZbin. Question. As you sit down each evening/morning, what procedures do you go through to determine what options you are going to invest in the following day as there are 1,000’s to chose from.

[@projectfinance]

I don't. I'm not a trader like that. I don't trade every day. Sometimes I only trade a few times a month. I have a watch list of stocks that I watch and mostly do things in those stocks, or the overall market index (S&P 500).

[@lloyddinma9944]

This dude is the best!

[@projectfinance]

Thanks dude!

[@lloyddinma9944]

@@projectfinance Hello Chris....Got Tasty Works and have executed my first set of credit spreads. I like the platform. However, the displayed IVX on the options trade tab doesn't add up: when I compute a one SD with it, I do not get the number in brackets. And the help sections are not helping at all to explain this. If you know what I am referring to, please can you explain why? Or is this a bug?

[@MrGlobalxD]

Can I have a download link for the presentation?

[@LemonSquueeze]

Thank you for this Video. I was just curious to how you got the 68% probability for the +or- 10.75 for the 250$ stoxk

[@davidtewelde2606]

simply the best.very easy to understand

[@reyultra9247]

I am unclear on how to find the amount of days the implied volatility was below the current level.

[@cansly92]

Very Good Video Very Clear How do you plot historical IV, rank & percentile over time? Is it possible to plot premium VS stock price over time for a fixed strike price? Thanks

[@jimbala2967]

Hi how did you get 180 days? Show the formula how did you calculate? Thnx J.Bala

[@robertingersoll5289]

Re: @ 22.44 in your video. On TOS Trade Tab, for each option chain there is a figure for implied volatility and expected move in the top right corner. For example for GME today, the 19FEB21 chain, the number was 630.5%(+-929.6). I understand what that means but I am not sure HOW the 929.6 move is calculated from 630.5% IV. I will appreciate any comments or thoughts ??? What formula are they using. The formula in @22.44 gives way off result.

[@cottondai]

Great video. Thank you for your lesson.

[@projectfinance]

You're welcome and thank you for the nice comment! -Chris

[@prabhakarpotu6617]

Excellent and very good lecture

[@jrr7031]

So.....the IV % of a strike price is the theoretical amount that strike price could move, up or down?

[@250gto9]

Is there a way to watch the "volatility" of the implied volatility?

[@projectfinance]

You can watch the implied volatility of implied volatility. The VIX measures SPX option prices (which means the VIX is measuring the implied volatility of SPX). VVIX measures VIX option prices, which means VVIX is measuring the implied volatility of the VIX. Therefore, VVIX tracks the implied volatility of the implied volatility of the SPX index.

[@kingdrew5083]

This is great explanation video.

[@dineshkukreja4964]

You're brilliant teacher. Keep up the good work.

[@projectfinance]

Thank you! 😃

[@bernardshaw6905]

Outstanding video. Great help, thank you.