Historical vs. Implied Options Volatility

http://optionalpha.com - The difference between a stock's historical volatility and the implied volatility from options pricing creates our edge as traders because we have proved that options pricing is expensive (rich) long-term since IV overstates the expected move of an underlying security. ================== Listen to our #1 rated investing podcast on iTunes: http://optionalpha.com/podcast ================== Download your free copy of the "The Ultimate Options Strategy Guide" including the top 18 strategies we use each month to generate consistent income: http://optionalpha.com/ebook ================== Grab your free "7-Step Entry Checklist" PDF download today. Our step-by-step guide of the top things you need to check before making your next option trade: http://optionalpha.com/7steps ================== Have more questions? We've put together more than 114+ Questions and detailed Answers taken from our community over the last 8 years into 1 huge "Answer Vault". Download your copy here: http://optionalpha.com/answers ================== Just getting started or new to options trading? You'll love our free membership with hours of video training and courses. Grab your spot here: http://optionalpha.com/free-membership ================== Register for one of our 5-star reviewed webinars where we take you through actionable trading strategies and real-time examples: http://optionalpha.com/webinars ================== - Kirk & The Option Alpha Team

Comments

1. If the formula used to calculate IV is historically and objectively wrong - by what appears to be a consistent, quantifiable percentage - why has the formula not been updated to correct for this? Or is it the case that this formula has the smallest average margin of error(that we've found) and we can't really do much better?
2. Very worthwhile clear explanation; I am going to send this to one of my beginning option students.
3. It is correct to say that very option contract has an associated IV value and the IV of a stock is a single number based on the IV values of a set of ATM options for the stock?
   
   Thanks!
4. Great video! Well explained and backed up by actual data.
5. What software are you using when showing the probability of exp cones?
6. thanks
7. Great job!! Really very helpful.
8. at 22:22 you cannot change the option price by changing vol to whatever you want if that is possible anyone would
   change the vol reduce the price and place an order.
9. Hi! In TOS in the option statistics there are some confusing numbers about HV and IV. For example FB IV 52wk hi and lo migh be .5 and .1. Then Current IV is 20%. Does that mean it is .2?