We already know that indicators like IV/HV can tell us whether an option’s implied volatility (IV) is high or low.
So here’s the next question: how can you capture opportunities as IV moves up and down? And does high IV favor buyers or sellers? 🤔
📘 Let’s see how The Options Handbook explains IV:
▶ IV Is Cyclical and Emotional
Implied volatility isn't random; it usually moves back toward its average over time, fluctuating between market anxiety and calm periods.
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When markets panic, IV can shoot through the roof, but it rarely stays there.
For example, $NVIDIA(NVDA)$ saw its IV surge to 93.39% on April 8 this year, then drop by 40% just days later.
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When things are too quiet for too long, traders start bracing for surprises, and IV creeps up again.
▶ How Buyers and Sellers Approach IV
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Buyers: Prefer low IV contracts — cheaper premiums, and they benefit if IV rises.
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Sellers: Prefer high IV contracts — higher premiums, and they profit if IV falls.
▶ Key Takeaway 💡
If you want to position ahead of a big market event, always judge whether IV is currently high or low.
Otherwise, you could get the direction right but still lose money on the option.
🎁 The Options Handbook includes more insights on IV’s market patterns — now available in the Tiger Coin Center! 🛒
>> Redeem Options Handbook Now <<
>> Click here for the Simplified Chinese version <<
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