The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What makes a stock volatile?” The simple answer to this question is just changes in expectation and when changes and expectation are not in alignment with what people had thought previously, that’s what causes stocks to become volatile. If you really think about how stocks get really volatile particularly around earnings events, it’s only driven by the fact that we have new information that changes our future expectation of where the stock is going to go. And so, if that new information is really good for example for a stock and people have assumed that the stock was going to have a bad year and it turns out, the stock might have a good year, then we see a dramatic change in the stock’s price. We have lots of volatility as market participants re-price the stock into a new territory. The same thing happens in reverse. If a stock’s having a really good year and then we have thi