Benefit from Implied Volatility Now

Option traders that understand Implied Volatility (IV) have an advantage over those who do not.

Being on the wrong side of IV can destroy an option trade, even if the security moves in the desired direction.

If you’ve traded long calls and puts, you’ve most likely experienced the “What just happened” phenomenon.

It’s a similar feeling that a deer has when he sees headlights heading his way.

When stocks move in the desired direction and then traders watch their profit dwindle to a loss, they often look like a deer staring at headlights, prompting them to say out loud – “What just happened?”

It’s time you learn about the implications of Implied Volatility.

To begin let’s differentiate between an option’s intrinsic value, extrinsic (time) value and implied volatility.

Intrinsic Value

An option’s premium has two components. The first is intrinsic value. For call options, the amount by which the stock is trading above the strike price is consider intrinsic value. So, if the stock is trading at \$101.50, the \$100 call option will have \$1.50 worth of intrinsic value.

For put options, the amount by which the stock is trading below the strike price is considered intrinsic value. So, if the stock is trading at \$98.50, the \$100 put will have \$1.50 worth of intrinsic value.

An option’s premium should be worth its intrinsic value regardless of how much time is left.

Extrinsic Value

In addition to intrinsic value, an option’s value will have a component of extrinsic, or time value.

The more time there is between now and an option’s expiration, the greater the time value portion will be.

The image below can help you visualize the two components. Walmart (WMT) is trading at \$132.05. Looking at the \$131 call, on the right side, we know it should have a market value of \$1.05, because that’s how much WMT is trading above the strike price.

As you look at the option’s value on the left side of the image, \$3.80, we can determine that the call has \$2.75 worth of time value. The total value of the call option is the combination of its Intrinsic Value (\$1.05) plus its Extrinsic Value (\$2.75), which equals \$3.80.

Implied Volatility can increase or decrease an option’s extrinsic value whether the stock’s price moves or not.

Implied Volatility (IV)

I want you to think of implied volatility as option premium inflation or deflation.

When a fun event is sold out, it is implied that there will be high demand for tickets to the event, but no supply. If this happens, you’ll see, ahem, “entrepreneurs” selling tickets at super-inflated prices.

After the event, you couldn’t give the tickets away.

Implied Volatility works the same way. When there’s high expectation for price movement, option premiums become much more expensive as demand rises. After the expectations are gone, so goes the option’s value – premium deflation.

I call it Volatility CRUSH, and I’ve got a software program that helps me to recognize when IV will rise and when it will be CRUSHED!

How I’m exploiting Implied Volatility

My software, I call Brutus, was designed to specifically identify when IV is about to significantly rise, which in turns pumps up option values, and when it will be Crushed, deflating option values!

I’ve been taking advantage of events where IV is expected to rise significantly, and I’m going to show you how you can get involved.

Find out right now how it works by simply clicking here!

Now that you have a much greater understanding of how option premiums are impacted by IV, it’s time for you to get in on the action.

I meet each week with my Operation Surge Strike members to discuss tradeable Surge patterns and trading opportunities around earnings.

Get involved

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I’ll see you soon,

Tom Gentile