Most traders are familiar with market volatility as this is one of the determinants of the levels needed for option prices. Volatility is a way to measure the rate and the possible magnitude of the movement of prices of the underlying security or asset whether the trend goes up or down. Traders will have to pay for a higher premium if the volatility level is high and they may pay a lower fee for the premium if it is also lower. Traders will need the measure of the SV (statistical volatility) in order for them to be able to make calculations as to the market value of the option that they are considering.
However, there are times when the market value which is derived from a model may not be the same as the real market value for a particular option. Hence, option mispricing can happen. Traders have to be aware of the expected IV (implied volatility) that the market is actually pricing into an 선물옵션 option. The option models are used to calculate the IV through the use of the SV as well as the present market prices. This may not be an easy concept to grasp especially for starters but they can still trade through the use of software programs that are designed to do accurate calculations for them.
The SV refers to the measure of how fast the price has changed and the IV pertains to what the expected market price would be. When the level of volatility is high, traders have to check their options especially if they intend to buy because at this time, selling rather than buying may be more profitable. On the other hand, when the level of volatility is low, they may find better prices that make it best for buying options. Traders will have to incorporate their knowledge of the IV as well as the SV into their trading techniques so that they can have the advantage of winning more than losing from their trades.
It may also be a little difficult to understand the ‘Greeks’ that are involved in trading but basically they are used for option price statistics. The Vega for example is used by traders to calculate the price change for every 1% increase in the level of market volatility. What is important is that traders make their decisions accordingly like selling at high market volatility and buying at low market volatility. However, there are still other considerations though but at least traders have better opportunities if they know how the prices are expected to move based on the accuracy of their calculations.