Tag: options volatilty

Volatility Skew – situation where individual options on a particular entity have different implied volatilities that form a pattern  – the pattern can be a positive or negative skew Positive Skew (forward skew) – higher strikes, higher IV Negative Skew (reverse skew) – lower strikes, higher IV  Horizontal Skew – long term options with lower…

Estimate of the volatility of the underlying stock Low implied volatility –> Option considered cheap  Don’t blindly buy or sell based on Implied Volatility. There may, in fact, be a good reason why the options are expensive. Perhaps the company is involved in a major litigation, or it is a biotech company that has a…