calendar spread

How to Take Advantage of Vega (IV) in the Calendar Spread

As we have already explained earlier that Vega is about changes in implied volatility (IV). It is the rate of change of an option’s price on every 1% change in IV. As a result, as implied volatility increases, the option prices increases and Vega goes up if everything remains up: interest rate and DTE. Impact of Time Value or Theta on Vega The vega for an option having more number of days ...

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Theta (Time Value) in Options Trading

What is Theta (Time Value) in Options Trading?

Without a doubt, theta is the most popular and used Greek in options trading.  Every trader is lured by the prospect of eating premium from time decay. What is the time value in an option contract? Every options contract has two components: Intrinsic value and time value. The time value component is very high at the start of the options contract, but as time elapses, it starts melting. However, the strange ...

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Implied Volatility

What is Implied Volatility?

Implied volatility is a prediction of how much the price of a security will move over a given period of time. It's most often used to price options contracts. This is the single most important factor that decides whether you will make money in the trade or not. Therefore, it is important to understand this concept carefully. Implied volatility measures how much a security's price is likely to move up or ...

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The entire game of options trading depends on when to buy volatility and when to sell volatility. As we have already been told that we should usually try to sell when IV is higher and buy when IV is lower. The simple reason is premium is lower when implied volatility is low and vice versa. The million-dollar question is how to know IV is low and high. To solve this problem, ...

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Candlestick Chart

What Is Open Interest (OI)?

Options data can provide many useful insights about the market. It is even possible to gauze market direction with predictable accuracy. How is it possible? Here is how you can estimate market direction with options data. How can we predict market direction with Open Interest? However, before that, it is important to understand the basic concept. Understanding Open Interest (OI) Open Interest (OI) tells you how many options contracts are outstanding in ...

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