Options Jive

Monday – Friday | 8:40 – 9:00a CT

Falling Implied Volatility & Its Effect on Opportunity

Options Jive

Options involve risk and are not suitable for all investors. Please read before deciding to invest in options.

Today’s conversation centers around the broad market index, S&P 500, how it is priced, and how that pricing affects its implied volatility (IV). The guys dive into stock prices and weightings to flesh out index pricing using some formulas, and then move onto the dynamics of those weightings.

Just as weightings of the underlying stocks that make up the S&P 500 change over time, the implied volatilities of those stocks change causing the index’s IV to change along with the weightings. With the current Low IV environment seen in the S&P 500, we look into how it has been decreasing with the IVs of the individual stocks.

Finally, the video concludes with a look at the evolution of IV Rank over the years and how opportunity for selling options during a high IV Rank has not diminished over the years in the broad market or the single stocks.

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