Thread by @PowerTradeHQ

1/ For all the newbie Option traders asking about volatility here is the TLDR thread on IV. 🧵⚡️

Hopefully this clears a few things up. 👍

2/ IV is actually just the expected move of a certain percent over a defined amount of time.

So if IV is 60%, #BTC has the potential to move 60%.

3/ This percentage is actually a 1 standard deviation move. Which means it will cover #BTC's move 68.2% of the time.

4/ In Options, we measure IV using Vega. As Vega goes up and down the price of your Option increases or decreases respectively.

If you are "long" vega you want IV to go up. If you are "short" vega you want it to go down.

Here is our thread on Vega. 👇

https://twitter.com/PowerTradeHQ/status/1436333044286177292

5/ You can also tell whether an option is "cheap" or "rich" by looking at the skew.

Skew is just the difference in Put IV vs Call IV compared to At The Money IV.

6a/ You can use skew in a few ways.

⚡️If calls look more expensive than puts and you think price is going to mean revert you can sell the calls and buy the puts.

⚡️You can look at skew as a sentiment indicator...

6b/ If put IV is being driven up and the price of puts are increasing, maybe traders are more bearish than bullish and want protection.

7/ So there is your quick, down and dirty overview of Implied Volatility. Hopefully this was semi-helpful.

If you have any questions feel free to leave them in the comments below.

#Powertrade⚡️