QQQQ Options. SPY Options. Options Trading, Uncovered Options, Naked Options, Volatility, Historical Volatility, Implied Volatility, VIX

The Volatility of an asset, which usually is quoted as the annual standard deviation of an asset’s price, provides a measure of the random variability or dispersion of price per unit of time. If the price of an asset fluctuates widely over time, the asset has a high volatility, while if the price is relatively stable, the asset has a low volatility. Historical volatility and implied volatility, generally categorizes volatility in general. Implied volatility and your expectations of volatility in the short term and possibly in the long term can be dramatically affected when news comes out.

The standard deviation of the asset price returns, based on recent historical data, is the Historical Volatility. An annualized volatility level usually expresses it. Therefore, this is a measure of recent dispersion in the price of the asset.

Implied Volatility is the level of volatility that will result in the calculation of option fair value that is equal to the current option trading price. What is inferred from the price at which the option is trading, is the volatility. The current market consensus of the volatility reflects this. Whether option premiums are relatively expensive or inexpensive, or whether that premium is truly warranted or not is measured by the implied volatility.

In 1993, the VIX was established by the CBOE. This is a measure of stock market volatility and uncertainty. Traders use this as a general indication of index option implied volatility and as an indicator of volatility of the U.S. equity market even though the VIX is only a general measure of volatility in the OEX. It is calculated based on option activity. Fear or pessimism in the market are indicated by high values. Optimism or complacency are indicated by low values. High values indicating widespread fear in the market is a bullish sign that the market may soon reverse, which is generally used as a contrarian indicator of investor sentiment.