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This article discusses some of the reasons why implied volatility changes and the aftermath of when the change does occur. Every question deserves an answer, even one on Implied Volatility, if to better understand how the markets work. The following article gives an overview to the reasons behind changes in IV. Implied Volatility– What is it? Implied volatility (IV) is a very important concept for options traders to understand for a couple of reasons. For one, it shows how volatile the market might be in the future. Also, it can help calculate probability. Probability is a crucial component of options trading because it may be helpful when trying to project the likelihood of a stock reaching a particular price by a certain time. Know that while these reasons may provide assistance when making trading decisions, it cannot provide a forecast with respect to market direction. Although IV is viewed as important information or data, it is determined by using an option pricing model, which makes the data theoretical in nature. There is simply no guarantee these forecasts will be correct. Advantages of Changes in Implied Volatility to Traders When trading involves real money, elements of the game change. So, when it changes, there is also the possibility of earning some serious money, which is always fantastic. However, there is also the chance of losing far more than the trader realizes is at stake, which can be devastating. Trading is not just a simple game. One must have at the very least, some basic understanding of the rules of engagement – and in this case, it's a basic idea of how the markets work. How Does Implied Volatility Change There is not one individual or factor that can change the implied volatility of AAPL options. In fact, it takes much more than a single 'who' or ‘what’ to change IV. Changes occur for basic reasons, and all factors, no matter how subtle, make a difference. Thousands of contracts are traded every day. If any one person attempted to bid prices higher or offer them at steadily lower prices, this person would be stampeded by everyone else in the marketplace who thought he was erroneous in his efforts. Some factors that may cause changes in IV are supply and demand, market marker positions, and fear and complacency. Traders who have not been in the market long enough have seen IV decline recently. They've seen it, but they may not understand why this has happened. The understatement is that the purchase of any option can drive prices higher, especially when there are enough buyers. If you want to know more about implied volatility and how prices are determined, you can simply visit whatifoptions.com. Visitors can also find vast and general information about the whole concept of options strategy and options trading markets on the site as well.
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