Volatility
|
| ||
| The magnitude of price (or yield) changes over a predefined period of time. The amount by which an underlying instrument fluctuates in a given period of time. Also, the gross price movement over a specified period of time given a minimum value unit. Some stocks are very stable while others are very volatile. The more volatile the stock, the more options will cost because the more likely it is that a trader might make money. Volatility is measured by the beta factor—you need a stock with a high beta in order to get the options to fluctuate in value, and if they don’t fluctuate it is almost impossible to trade them. |
||
|
Additional Comments:
Options often increase in price when there is a rise in volatility even if the price of the underlying doesn't move anywhere.
Volatility is a primary determinant in the valuation of options. There are two main types of volatility: historical and implied. |
Related Terms: | ||
Vega The sensitivity of an option price to volatility. Typically, options increase in value during periods of ... Beta A means of measuring the volatility of a security or portfolio of securities in comparison with ... Volatility Stops Monitoring implied volatility is critical in long neutral delta trading. Check the current volatility of the ... | ||
« View the Stock Market Dictionary »
Latest Financial Advice
- Index Fund vs Mutual Fund
- Roth IRA Tax Guidelines
- Impact of News on Trader’s Psychology and Market Trends
- Overconfidence Bias in Stock Trading: A Critical Analysis
- Mastering Mindfulness Practices for Traders
- Impact of Market Volatility on Individual Psychology
- Leveraging Intuition in Stock Trading: A New Approach
Free Investment Advice
| Get free stock market tips and investing advice by subscribing to our newsletter: |
* Your information will not be shared or sold. |
Recommended Reading
Categories
- Trading Basics
- Investing 101
- Investing Essentials
- Understanding the Risks
- Beginning to Trade
- Trading Strategies
- Trading Psychology
- Retirement Investing
- Personal Finance
- Advanced Trading
- Penny Stocks
- FOREX Trading
- Commodity Futures
- Stock Tips
- Going Public
- Real Estate
- Research Tools
- Stock Spam
- Reviews
- Stock Market Dictionary
RSS