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 be answering the question, “What causes implied volatility changes?” Implied volatility is so very important as an options trader and this is a really interesting concept because I don’t think a lot of people understand what actually causes implied volatility to change and it’s simply this. Implied volatility changes only because of expectation and that’s it, the expectation that the stock will be more volatile or less volatile in the future. That is the only thing that changes implied volatility because remember, implied volatility is implying or guessing basically at some predicted volatility in the future. If a company says, “We are going to have an FDA announcement a week from today.” Well, then we know that that FDA announcement is going to either be an approval or a disapproval, right? Naturally, investors in that particular stock might have a much higher implied volatility expectation. They