Episode 9 of 'Saxo Options Talk': demystifying volatility in options trading
Koen Hoorelbeke
Options Strategist
Résumé: In Episode 9 of 'Saxo Options Talk,' Koen Hoorelbeke and Peter Siks tackle the intricate topic of volatility, a key concept in the realm of options trading, aiming to clarify its significance and application for traders at all levels.
Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks.
Introducing Episode 9 - Demystifying Volatility in Options Trading
Dive into the ninth episode of 'Saxo Options Talk,' aptly titled "Demystifying Volatility in Options Trading." Koen and Peter shed light on the elusive subject of market volatility, from the basics to its profound effects on options pricing and strategy.
Volatility Unveiled
Volatility is the heartbeat of the market, influencing every tick. This episode demystifies what volatility really means, distinguishing between low and high volatility stocks with real-world examples and explaining the importance of the volatility number itself.
Core Aspects of Volatility
- Two Faces of Volatility: The conversation navigates through the nuances of historical/realised and implied/expected volatility, detailing their roles in option valuation.
- Vega and Option Pricing: Vega, a lesser-known 'Greek,' steps into the spotlight, revealing its critical function in the pricing of options under volatile conditions.
Decoding Volatility Metrics
- The Scale of Volatility: Understand the relativity of volatility numbers across different underlyings and what the average value of the VIX tells us about market sentiment.
- Cross-Market Volatility: Compare how volatility manifests across various asset classes, providing a broadened perspective on market dynamics.
Implications of Volatility
- Volatility's Market Behavior: Explore volatility's mean-reverting nature and its inverse correlation with market trends.
- Strategic Impacts: Assess how volatility affects option strategies, particularly the significance of time to maturity and strike levels.
Historical Perspective and Strategy Adaptation
- Lessons from History: Reflect on how events like Black Monday have shaped our understanding of volatility, especially in the formation of the 'volatility smile.'
- Tailoring Strategies to Volatility: Conclude with a discussion on choosing the right options strategies for different volatility environments and the critical timing of these decisions.
Who Should Listen?
Whether you’re a novice curious about the term 'VIX' or a seasoned trader refining your strategies, Episode 9 is an invaluable resource for anyone looking to grasp the concept of volatility and use it to their advantage.
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Join the discussion
After tuning in, join me on my Threads profile to share your thoughts and insights on the episode. It's an excellent platform for engaging with fellow traders and enhancing our collective understanding of options strategies.
Your questions, our answers
We're eager to hear from you! Send your options-related questions to optionquestions@saxobank.com. Selected questions will be addressed in future episodes, providing customized advice and insights.
Conclusion:
"Demystifying Volatility in Options Trading" provides the clarity needed to navigate and leverage volatility in your trading strategies. Koen and Peter's expert commentary will equip you to face the ebb and flow of the markets with newfound confidence. Tune in, gain valuable knowledge, and become a more adept trader with 'Saxo Options Talk.'
For continuous insights and updates on market/options strategies, interact with me/follow my social media account on Threads.
Previous episodes of the "Saxo Options Talk" podcast
- 21 Feb 2024: Options Talk - Episode 08 - Rolling
- 14 Feb 2024: Options Talk - Episode 07 - Put Spreads
- 7 Feb 2024: Options Talk - Episode 06 - Delta
- 31 Jan 2024: Options Talk - Episode 05 - Short Call Spreads
- 24 Jan 2024: Options Talk - Episode 04 - Long Call Spreads
- 17 Jan 2024: Options Talk - Episode 03 - Long Calls
- 10 Jan 2024: Options Talk - Introducing -Options Talk by Koen and Peter- -Your Weekly Podcast on Options Trading
Previous "Volatility reports":
- Volatility report - week 9 - 26 feb 24 -- 1 mar 24
- Volatility report - week 8 - 19 feb 24 -- 23 feb 24
- Volatility report - week 7 - 12 feb 24 -- 16 feb 24
- Volatility report - week 6 - 5 feb 24 -- 9 feb 24
- Volatility report - week 5 - 29 jan 24 -- 2 feb 24
- Volatility report - week 4 - 22 jan 24 -- 26 jan 24
- Volatility report - week 3 - 15 jan 24 -- 19 jan 24
Previous "What are your options" articles:
- 23 Feb 2024: What are your FX options - NZDUSD and NZDJPY
- 12 Feb 2024: What are your FX options - USDJPY - after 148 breakout
- 24 Jan 2024: What are your options - Tesla Q4 Earnings
- 18 Jan 2024: What are your FX options - EURUSD elevated volatility
- 12 Jan 2024: What are your options - Coinbase after BTC ETF approval
- 21 Nov 2023: What are your options - Nvidia earnings
- 08 Nov 2023: What are your options - Disney earnings
- 26 Oct 2023: What are your options - Nasdaq Selling Premium
- 29 Aug 2023: What are your options - Salesforce earnings
- 25 Aug 2023: What are your options - the Qs - Nasdaq etf
- 23 Aug 2023: What are your options - Nvidia - earnings - market reactions
- 21 Aug 2023: What are your options - swing trading semi-conductors - stocks vs options
- 18 Aug 2023: What are your options - using TLT as an inverse proxy for the 10 year yield
Related articles:
- From zero to hero - buying options
- From zero to hero - selling options
- From zero to hero - option strategies
- From zero to hero - options lexicon
- Why options strategies belong in every traders toolbox
- Understanding and calculating the expected move of a stock etf index
- Understanding Delta - a key guide for Investors and Traders - part 1
- Understanding Delta - a key guide for Investors and Traders - part 2
- Trading 0DTEs - get your feet wet - without drowning - part 1
- Trading 0DTEs - get your feet wet - without drowning - part 2
Previous "Investing with options" articles:
- 19 Feb 2024: Investing with options - Securing your tech stock gains with simple hedging strategies - 2of2
- 19 Feb 2024: Investing with options - Securing your tech stock gains with simple hedging strategies - 1of2
- 2 Feb 2024: Investing with options - Microsoft - buying stock or options - a comparison
- 25 Jan 2024: Investing with FX options - Hedging USDJPY currency risk
- 8 Jan 2024: Investing with FX options - Hedging currency risk
- 30 Nov 2023: Investing with options - striking gold (GLD)
- 23 Nov 2023: Investing with options - hedging the Nasdaq 100
- 17 Nov 2023: Investing with options - Nvidia - pre-earnings
- 10 Nov 2023: Investing with options - AdYen - post investor day
- 31 Oct 2023: Investing with options - Novo Nordisk earnings
- 31 Oct 2023: Investing with options - Apple earnings
- 24 Oct 2023: Investing with options - Amazon earnings
- 24 Oct 2023: Investing with options - Meta Platforms earnings
- 23 Oct 2023: Investing with options - Alphabet earnings
- 20 Oct 2023: Investing with options - Microsoft earnings
- 18 Oct 2023: Investing with options - Tesla earnings
- 17 Oct 2023: Investing with options - long bonds - TLT