Excellent video! I really like how well you have visually explained these subjects that often are hard to understand on finance class. Hopefully more people watch this video (currently only 1235 views) since it's very well done and easy to follow.
Shouldn't the VIX rise when there is extreme optimism and people buying the hell out the S&P 500? Because it would imply that the future upside volatlity is high, and the payoff of the call option is high, therefore traders are crowding into the call options, resulting in a more expensive option. No? I am confused!! Help !
Implied Volatility doesn't really say which options prices are higher, put or calls. If IP is a measure of the "richness" or expensiveness of an option, wouldn't it make sense to clarify whether it is a put or call that is the more expensive option? For example, the VIX is the weight-avg IP of ATM or near ATM options, so when volatility is expected to be high, the prices increase. But usually the VIX only breaks "fear" barriers when the market is crashing.
great video. But I am confused. So implied volatility acts like more like a price than as a statistical measure. It measures the future volatility expectations of traders given the current market price. And I understand that higher volatility ( or greater swings in the future price) generates more expensive options, because the payoff would be larger ( S(0) - X ) or ( X - S(0) ), but .... see next comment
Excellent video! I really like how well you have visually explained these subjects that often are hard to understand on finance class. Hopefully more people watch this video (currently only 1235 views) since it's very well done and easy to follow.
MrBarreli 4 months ago
Shouldn't the VIX rise when there is extreme optimism and people buying the hell out the S&P 500? Because it would imply that the future upside volatlity is high, and the payoff of the call option is high, therefore traders are crowding into the call options, resulting in a more expensive option. No? I am confused!! Help !
teknashend 5 months ago
Implied Volatility doesn't really say which options prices are higher, put or calls. If IP is a measure of the "richness" or expensiveness of an option, wouldn't it make sense to clarify whether it is a put or call that is the more expensive option? For example, the VIX is the weight-avg IP of ATM or near ATM options, so when volatility is expected to be high, the prices increase. But usually the VIX only breaks "fear" barriers when the market is crashing.
teknashend 5 months ago
great video. But I am confused. So implied volatility acts like more like a price than as a statistical measure. It measures the future volatility expectations of traders given the current market price. And I understand that higher volatility ( or greater swings in the future price) generates more expensive options, because the payoff would be larger ( S(0) - X ) or ( X - S(0) ), but .... see next comment
teknashend 5 months ago