What is IMP volume?

What is IMP volume?

Shows the top underlying contracts (stocks or indices) with the highest vega-weighted implied volatility of near-the-money options with an expiration date in the next two months.

What is IV in option trading?

Implied volatility (IV) is an estimate of the future volatility of the underlying stock based on options prices. Generally, IV increases ahead of an upcoming announcement or an event, and it tends to decrease after the announcement or event has passed.

What does Vol mean in options?

The volume metric tabulates the number of options or futures contracts being exchanged between buyers and sellers in a given trading day; it also identifies the level of activity for a particular contract.

What is considered high volume for options trading?

High option volume is when there is abnormal volume that far exceeds the volume for similar strike options. Typically it can be 200% or higher volume.

What is considered high IV?

Put simply, IVP tells you the percentage of time that the IV in the past has been lower than current IV. It is a percentile number, so it varies between 0 and 100. A high IVP number, typically above 80, says that IV is high, and a low IVP, typically below 20, says that IV is low.

How IV affects options price?

Put simply, higher volatility, sometimes called IV expansion, creates higher uncertainty about the future price action of the stock. As a result, IV expansion causes the prices of options to increase because the writers of options have a greater chance of losing a large amount of money.

What does heavy options trading mean?

Heavy call option volumes may or may not indicate good earnings. They really indicate a high expectation of an increase in value, which may or may not occur.

What IV is too high?

It is a percentile number, so it varies between 0 and 100. A high IVP number, typically above 80, says that IV is high, and a low IVP, typically below 20, says that IV is low. How is IV percentile useful in options trading? Let us take an example.

How high can implied volatility go?

The short answer to this question is: Yes, volatility can be over 100%. Volatility can theoretically reach values from zero (no volatility = constant price) to positive infinite.

Is high IV good or bad?

High IV (or Implied Volatility) affects the prices of options and can cause them to swing more than even the underlying stock. A stock with a high IV is expected to jump in price more than a stock with a lower IV over the life of the option.

Why is implied volatility important in options trading?

Implied volatility is an essential ingredient to the option-pricing equation, and the success of an options trade can be significantly enhanced by being on the right side of implied volatility changes. To better understand implied volatility and how it drives the price of options, let’s first go over the basics of options pricing.

How is implied volatility calculated in ATM options?

Since most option trading volume usually occurs in at-the-money (ATM) options, these are the contracts generally used to calculate IV. Once we know the price of the ATM options, we can use an options pricing model and a little algebra to solve for the implied volatility.

How can you tell when implied volatility is high?

Look at the peaks to determine when implied volatility is relatively high, and examine the troughs to conclude when implied volatility is relatively low. By doing this, you determine when the underlying options are relatively cheap or expensive.

How are strike prices affected by implied volatility?

Each strike price will also respond differently to implied volatility changes. Options with strike prices that are near the money are most sensitive to implied volatility changes, while options that are further in the money or out of the money will be less sensitive to implied volatility changes.