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Future Volatility

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Future Volatility
A prediction of what volatility may be like in the future.

 


Implied volatility (IV) reflects expectations regarding the underlying asset's future volatility, used to determine an option price.

How do you know future volatility? You don't. An option buy is a bet on future volatility. If the market moves a lot (either way) you will be better off with the options.

While the implied volatility refers to the market's assessment of future volatility, the realized volatility measures what actually happened in the past. The measurement of the volatility depends on the particular situation.

Different investors may have significantly different expectations about the future volatility of a stock. Hence, there will often be different perceptions of what the "fair" price of a particular stock option should be.

Because implied volatility is the only unknown input, proper options pricing is entirely dependent on accurate forecasts of future volatility.

A measure for the market to forecast future volatility.
Inside session
This is a trading session where the high and the low of a trading period remains within the high and the low of the previous trading session.

What is the Volatility Index? This index measures future volatility. It provides us with a good indication of the level of fear and greed in the market.

The implied volatility corresponds with the expectation of the market participants about the future volatility of the underlying which is reflected in the current option price.
Writer: The seller of an option contract.
Other Software ...

value is determined by five principal factors - the price of the stock, the strike price, the cumulative cost required to hold a position in the stock (including interest + dividends), the time to expiration, and an estimate of the future volatility ...

These two triangles bring up an important side point: Usually, currencies lose value faster than they gain it. That is to say, a descending triangle suggests somewhat more future volatility than an ascending.
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This divergence is an indication of future volatility but without a clear sense of future direction.

These calculations include the historical data of a cluster, and then use them to calculate the future volatility by looking at probability distributions related to a variable like price.

See also: Future, Volatility, Right, Stock, Market