 Hey Navigation Traders, welcome to this short video lesson on implied volatility, our edge for trading options. So you may have heard the term implied volatility, but what does that really mean? And more importantly, how can you use it to your advantage to make money trading options? First volatility is simply the magnitude of a stock's price swings. So a stock has low volatility, if it doesn't move very much, and it has high volatility, if it has big price swings. Implied volatility simply gives you a future expected volatility of the underlying symbol that you're trading. So if a stock has high implied volatility, the options on that stock are expensive. If the stock has low implied volatility, the price of the options are cheap. I want to make a couple more points about implied volatility, and then we'll go to the platform to show you an example. The other key factor to remember about implied volatility is that it's mean reverting. What goes up must come down, and as I show on the screen, except for the price of a stock. A stock can continue to go higher, higher, higher, and never revert back to its average or never revert back to its mean, but implied volatility is mean reverting. It goes up, it goes down, it expands, and it contracts. And it does this due to the fear that comes in and out of the marketplace. So if there is fear or uncertainty, implied volatility goes up. If things are calm and certain, implied volatility goes down. The fact is, with trading options and a lot of other things in life, fear is almost always overstated. So when fear or uncertainty comes into the marketplace, implied volatility goes up. The options get more expensive, and this is when we like to come in and place trades to take advantage of that overstated fear of that high implied volatility and sell options when they're more expensive. Let's go to the platform and take a look at an example. So this is a chart of SPY, which is the S&P 500 ETF. First what you'll notice about price, and this is going back to February of 2016, all the way through the time of this recording, which is December of 2017. As you can see, the price has been very bullish. It's continued to increase in price over the last couple of years with very little downside and very little pullback. So as I mentioned before, the price of a stock is not mean reverting. And what I mean by that, if I take my drawing tool and draw a line at what is about the average, let's call it $225 right there, there's nothing that says that the price of SPY has to revert back to its average, or revert back to its mean. Now it could have a pullback, or it could continue higher. Markets don't continue in one direction forever, typically, however the price of a stock or ETF is not considered mean reverting. However, down at the bottom I'm showing our navigation trading implied volatility indicator. This indicator is given to all of our members and we have more in-depth training in our courses about the indicator and how to benefit from its use. But the point I want to make in this lesson is that you'll notice that the implied volatility indicator ranges from 0 to 100. So as I mentioned before, when fear comes into the marketplace, implied volatility goes up, making the options more expensive, and then it contracts back down. It expands and contracts, expands and contracts giving it those mean reverting characteristics. So one of the keys to our trading strategy is we're selling options, or we're putting on trades when implied volatility spikes, and we're profiting when the implied volatility contracts. Implied volatility is a key component of trading options, and by understanding how it works, it gives us a huge edge for making consistent profits. I hope this video lesson on implied volatility was helpful. For more lessons on various topics, visit our blog at navigationtrading.com forward slash blog. Happy trading. Talk to you next time.