Introduction to Options (Part III)

Written: April 9, 2020 at 11:42 AM
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Robinson, J. [Options Trading University]. (2019). Introduction to Options (Part III) [Video File]. Retrieved from https://followthemoney.com/options-trading-university/

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Summary

Understanding Volatility, Option Greeks, And How To Value An Option

Questions

Why is it better to buy a put option instead of shorting stocks?

How does implied volatility (IV) work?

What can you do to stack the probability in your favor?

Why does IV rise in downtrends and fall in uptrends?

Notes

[6:20] Time is working against buyers and for sellers

[9:15] The house is always going to win, otherwise they wouldn't be in operation. So just try to be the house.

[11:20] Higher historical volatility (HV?) means higher risk for the seller, so they sell their option at a higher price to be compensated for that assumed risk.

Smart options traders buy options when volatility is low and sell when they are high.

[19:50] Delta - The amount an option's price will change for a corresponding one-point change in the price of the underlying security.

YOu want to buy high delta options so the vaule goes up to be closer to the original stock