Using Implied Volatility to Plan Your Futures Trades

Erich Senft discusses how to use implied volatility to plan your futures trades: There's a little tool I use to help me get an idea which markets are going to be more volatile, more whippy than others, and that is to check the implied volatility of the option market for the futures market I'm interested in. So in effect I'm looking at options to give me an idea what the futures might do or how the futures may act. Why am I looking at options? Well, because volatility is a huge component of pricing an option, therefore, options which are more volatile have a tendency to be more expensive. And an option would be more volatile if the underlying futures market was in turn being more volatile. You can read more about using implied volatility to plan your futures trades at supportandresistance.com

Comments