Implied Volatility

Trading bonds, especially Treasury bond futures and options, requires an understanding of how different types of bonds work, maturity, and price volatility.

Explore the concept of theta in options with this guide and discover three trading strategies focused on time decay, also referred to as theta decay.

Having a risk reversal options strategy provides downside protection to the level of the purchased put option but limits the upside potential of a long stock position to the strike of the short call option. Here's how this strategy works.

Explore the popularity of 0DTE options trading. With increased volume comes tighter spreads but beware of market volatility. Learn about the potential risks and rewards.

Gamma scalping—also called delta-neutral trading—is an options strategy designed to help traders navigate pricing volatility.

Discover how to calculate historical volatility (HV) and implied volatility (IV) rank using percentiles on thinkorswim to assess normal or unusual changes.

Pairs trading can be risky without a proper understanding of the financial markets. Learn how to apply a pairs trading strategy effectively in this guide.

Discover options volatility skew (vol skew), which refers to the variation in implied volatility (IV) between out-of-the-money (OTM) calls and puts.

What is a market maker, anyway? Market makers are professional traders typically on the other side of retail trades. Here are market maker strategies to learn.

The Cboe Volatility Index (VIX) is often considered to be a gauge of investor uncertainty. Learn how to trade the VIX with tips found in this guide.

Protective puts are one way to hedge stocks against a significant price drop. But investors should consider factors such as time decay and volatility.

The calendar spread strategy can be effective during sideways markets and periods of low volatility. Learn how to set up and roll a calendar as well as the benefits and risks of this options strategy.

Explore rolling options “losers” to extend duration for covered calls, naked calls or puts, one side of a short strangle, and select other trades.

Trading a stock around earnings day isn’t always simple. There tends to be volatility risk. It also helps to really know the company’s fundamentals. Read this article to learn how to trade during earnings season.

What is a black swan event? Learn about black swan events and how you can attempt to protect yourself and your portfolio from adverse shocks.

Options volatility is a popular topic among traders. Looking at volatility from a trading capital, past activity, or probability lens may give you better insight.

Both Amazon (AMZN) and Tesla (TSLA) announced stock splits. Find out what happens to options when a stock splits and what it means for investors.

Can a straddle options strategy be used around earnings announcements or other market-moving events? Yes, but there are risks and other considerations.

Vertical spreads are fairly versatile when taking a directional stance. But what if you're stuck in a range-bound market? Learn about iron condor strategies.

To follow or bet against the crowd? Learn how the put/call (P/C) ratio is calculated and how to use the P/C ratio as an indicator of stock market sentiment.

Should you focus your attention on those meme stocks or look the other way? Here are some tips to consider.

Some option traders stick to selling strategies only, but buying calls and puts have their place too. You just have to remember these five tips.

Suppose you buy a call option at a given strike price. Now what? The Theoretical Price tool on thinkorswim can help you assess what it could mean for your trade if the underlying stock reaches your price target by a certain date, if it goes the other way, if implied volatility changes, and more.

Diversification isn’t just about stocks, bonds, and cash. When hedging risk for an options portfolio, think price, time, and volatility.

When you look beneath the Analyze tab on thinkorswim®, you may find some features you may not have known about.

When trading options, it can be helpful to assess the probabilities before making a decision to enter a trade.

Understanding the nature of volatility regimes and recognizing when it’s shifting could help unlock potential trading opportunities.

A long butterfly spread is typically initiated with a debit. Learn how to turn it into a broken wing butterfly by adjusting one of the wings of the spread.

Learn how the Risk Profile tool in the thinkorswim platform can help options traders visualize different scenarios and make trading decisions a little simpler.

With many options trading strategies to choose from, how do you find the right one? Consider a three-step process to help with your decision.

Volatility and options greeks can be perplexing even to the pros. But if you focus on a few data points, you may gain more insight into the options market.

Options straddles and strangles are a way for advanced traders to get long or short exposure to volatility (vega), but the volatility needs to be weighted against time decay (theta). Here are the basics.

Option traders know volatility can increase leading up to a company’s earnings report. But it can also dive quickly after an earnings announcement. Know what to keep an eye on before making those earnings trades.

Do the headwinds of time decay turn you off from buying single options on volatile stocks? Find out how you may be able to turn the headwinds into tailwinds by trading those stock moves.

We often hear about traders selling options. But why (or when) might a trader buy options?

Have you ever seen implied volatility drop so quickly that it killed your trade? Try these risk management ideas to manage volatility crush.

Return on capital and liquidity mean specific things in finance. But they can mean something different to an option trader. Read this options trading terminology guide to find out.

Have a single-leg option? Consider using a vertical spread to turn it into a defined-risk spread to lower the margin requirements and free up capital at the same time.

Learn how weekly stock options can help you target your exposure to market events such as earnings releases or economic events.

When trading options you will need to consider price, time, and volatility at the same time. That means understanding the interplay of a few options greeks and how they play off one another.

Implied volatility and vega both measure volatility but they have some differences. Here’s some insight from an education coach at TD Ameritrade.

Is the market pricing in a greater-than-typical move in a stock? Check the Market Maker Move indicator on thinkorswim®. Its magnitude can help inform your trading decisions.

A leadership change in the White House could mean a shift in policy priorities, but if you’re a long-term investor, other factors such as earnings, taxes, and interest rates may be larger concerns. Perhaps now’s the time for a post-election portfolio review.

Trading stocks and options can play tricks on your mind. Control as much as you can to reduce the risks you can't control. Avoid these four trading mistakes.

Learn how the VIX, VIX futures, and VIX options work together to help traders increase market awareness, make more informed options trading decisions, and employ trading strategies.

The Market Maker Move (MMM) indicates the expected magnitude of an upcoming move such as earnings. It can provide some useful info that you can use when trading options.

When deciding between trading credit spreads or debit spreads, it can be helpful to align the options strike prices and expirations with the level and direction of implied volatility.

Arbitrage helps keep financial markets efficient, often with the aid of complex algorithms, pricing models, and lots of capital. Here’s a look at three types—index arbitrage, volatility arbitrage, and bond arbitrage.

Compared to covered calls and other basic options strategies, diagonal spreads don’t get a lot of love. But not only are they relatively straightforward, they’re also flexible and versatile. Here’s the story.

The volatility Rule of 16 can be useful when figuring out how much an options price is likely to move especially during earnings. This can be helpful in planning trading entry and exit points.

The global foreign exchange (FX) market is deep, liquid, and traded virtually around the clock. If you’re an option trader in search of a new asset class to trade, consider options on currency futures.

The effect of interest rates on options prices—rho—is sometimes considered the forgotten greek. But interest rates matter, especially when deciding when to exercise options positions.

Different volatility numbers tell you different things. Is one more useful than another? Let's find out.

Looking to pick stocks worth trading? You can lay the groundwork for a sound stock selection strategy with a few relatively simple components.

A small trading account shouldn’t stop you from trading like traders with large accounts. Here are three options trading strategies to let you trade lower-priced stocks with similar risk/return as more expensive stocks.

Ask the coach: Education coaches from TD Ameritrade answer questions from seasoned traders and newbies. In this issue, learn about the difference between implied and historical volatility.

When trading options on futures contracts, the number of choices available—delivery months and options expiration dates—can be overwhelming. Follow the volatility curve to help you whittle it down.

Should you switch from trading long options strategies to short options strategies when volatility levels are high? Sometimes prices are high for a reason.

Earnings season can be a time of higher-than-typical volatility, which can mean an increase in risk as well as opportunity. Learn some of the options trading strategies you might use during earnings season.

Theta can indicate many things but you can only depend on it after you have closed your trade.

Even your best trading ideas won’t always go as expected. When you are looking at a losing position, employ game theory to guide you.

Explore options statistics on thinkorswim—implied & historical vol and percentiles, the Sizzle Index, and the put/call ratio. Learn how options stats can help traders and investors make more informed decisions.

Learn how a collar strategy—a covered call and a protective put—might be a way to manage stock risk.

thinkorswim has developed an interface dedicated to researching the effects that earnings announcements have on the prices of stocks and options.

Learn how a long calendar spread can be effective in a low-volatility trading environment.

Once you’ve learned to use the Risk Profile tool on the thinkorswim® platform for single-leg options, you may wish to use it for more complex trades.

Options trading involves risk, but these risks can be analyzed, monitored, and simulated with the thinkorswim® Risk Profile tool.

Learn the difference between implied and historical volatility, and find out how to align your options trading strategy with the right volatility exposure.

Learn the differences between equity options and options on futures contracts, and how experienced options traders can use futures options to enhance their trading.

Learn about the dynamics of foreign exchange volatility, and where to find currency volatility data.

Do you follow the VIX as a volatility measure? Ever heard of the rule of 16? How about volatility skew? Learn how to apply these concepts to options trading.

The sensitivity of option prices to changes in time, volatility, and the price of the underlying are commonly referred to as “Greeks.” As you prepare for earnings season, here's an overview.

Implied volatility usually increases ahead of earnings announcements and then drops after the news release. If you know implied volatility is going to drop after earnings reports, here are three options trading strategies you could trade.

Learn how adjusting a collar strategy—a covered call with a protective put—can help you manage stock risk.

Options on futures are quite similar to their equity option cousins, but a few differences do exist.

Are you an option looking for a strategy designed for a lower-volatility environment?

Learn about the dynamics of foreign exchange volatility, and where to find currency volatility data.

Learn how to dynamically hedge changes in an option position’s delta in a process known as “gamma scalping.”

Some option traders dynamically hedge positions, but doing so requires a basic understanding of synthetic positions and put-call parity.

Learn about the VIX and other volatility indexes and how some investors use them to assess potential risk.

Learn about gamma, which some traders consider the positive side of negative theta.

Learn how to structure a trade designed for uncapped profit potential.

When stuck in a low-volatility environment, check out the term structure. You might consider alternative covered call strategies.

If you have a directional view on a stock price, buying a vertical spread might be for you. But deciding on strikes and strike widths requires some thought.

Some economic indicators create more noise than others—learn to create trading strategies based on how markets might react to economic data.

Instead of hyper-focusing on one position at a time, look at your entire portfolio and try to figure out a better hedge—here's some tools and tweaks to help.

Looking for opportunities amid a low volatility trading environment? Learn about calendar spreads.

Learn some of the option trading alternatives you can use during earnings season.

Learn how a collar strategy—a covered call and a protective put—might be a cost-effective way to manage stock risk.

The sensitivity of option prices to changes in time, volatility, and the price of the underlying are commonly referred to as “Greeks.” Here is an overview of

How using Kurtosis to study abnormal market behavior—in particular how it explains the price behavior of options—can aid in your strategy selection.

Learn how an trading an iron condor can be an effective options strategy during earnings season.

Managing risk variables you didn’t know you could control—lessons learned in 2016 about direction, time, and vol, and what mistakes to avoid this year.

Learn how to increase the flexibility of your existing options strategies with weeklys: options that move quickly and live for about a week.

Laddering price, volatility, and time can take covered calls to a new level—look to collect more premium and diversify across vol and time.

The market doesn't care who becomes president, and savvy traders don’t care about predictions—just results. Prepare yourself for either scenario.

Stocks can be expensive, no doubt, but that doesn’t necessarily mean you can’t participate in rallies. Learn how call options can act as a substitute for stoc

Why trading in high-priced stocks may be no riskier than their low-priced brethren, and how to calculate that risk with implied volatility.

Zero skew, or even negative skew, can be favorable. Once skew starts rising, options traders might want to think twice before entering a calendar spread.

When discussing the markets, there’s a common question among investors and traders: What’s your position?