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The Skinny on Options: Abstract Applications

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The Skinny on Options: Abstract Applications

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

One of the most reliable relationships in the market is the inverse relationship between equity prices and market volatility. When prices rise, volatility falls, and vice versa. This holds true almost all of the time, regardless of whether you view prices as driving volatility or volatility as driving prices. Either way, the simple fact that the world is default long stocks adds a little extra juice to option prices, and the additional notion that realized volatility routinely comes in under implied volatility gives tastytraders a little kicker to add to that juice.

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