When analyzing stocks, people often look at the P/E ratio to decide whether a stock is expensive or cheap. 📊 In the options market, that “price check” tool is called volatility. 📘 In the Options Handbook, volatility is explained like this: ▶ Measuring How Much Prices Move. 📈 Volatility tracks how wildly a stock tends to move. There are two primary flavours of volatility: Implied Volatility (IV)–the market’s forecast of future moves. If IV is high, traders expect turbulence up, down, or both. If IV is low, the market's pricing in relative calm. But here's the key point: IV isn't about whether the stock will go up or down. It's about how uncertain things feel right now. Historical Volatility (HV)–ho
How to Profit from IV Crush in Earnings Season?
During earnings season, IV Crush refers to the sharp decline in implied volatility (IV) after a company's earnings report. Before earnings, IV rises due to uncertainty about the outcome, causing option prices to increase. After the earnings release, this uncertainty dissipates, leading to a rapid drop in IV. This decline impacts options prices, often causing them to decrease even if the stock price moves favorably. ----------------- How to take advantage of IV crush in earnings season? Share your experiences!
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