Price Targets for SPY
There are those that are currently bullish on SPY whilst others are bearish...
So I used Implied Volatility(IV) to obtain price targets, regardless of SPY's direction
before you read...
If you want to know the exact calculations behind using Implied Volatility to obtain price targets then check out one of my educational posts in which I explain how to do so. But incase you are unaware, Implied Volatility can help you obtain a price range in which the underlying asset has a 68% chance of staying within...
EXPLANATION
The IV I used was from a 397 July 25 Call in which was 15.89%
1 Day Movement
Once I de-annualized the figure I obtained a one-day price movement of 0.9%. Thus I displayed the range in which SPY has a 68% chance of staying within, which is between 401.49 and 393.60
End of Month Movement
Upon de-annualizing the IV I multiplied it by the square root of 7(There are 7 business days left in the month) and obtained 2.6%. Meaning, there is a 68% chance of SPY's price staying between 407.99 and 387.10 by the end of the month.
Why Use IV?
The numbers obtained allows us to use probability to gauge where an underlying asset may stay whilst avoiding outlandish price targets crated by our emotional hopes.
So I used Implied Volatility(IV) to obtain price targets, regardless of SPY's direction
before you read...
If you want to know the exact calculations behind using Implied Volatility to obtain price targets then check out one of my educational posts in which I explain how to do so. But incase you are unaware, Implied Volatility can help you obtain a price range in which the underlying asset has a 68% chance of staying within...
EXPLANATION
The IV I used was from a 397 July 25 Call in which was 15.89%
1 Day Movement
Once I de-annualized the figure I obtained a one-day price movement of 0.9%. Thus I displayed the range in which SPY has a 68% chance of staying within, which is between 401.49 and 393.60
End of Month Movement
Upon de-annualizing the IV I multiplied it by the square root of 7(There are 7 business days left in the month) and obtained 2.6%. Meaning, there is a 68% chance of SPY's price staying between 407.99 and 387.10 by the end of the month.
Why Use IV?
The numbers obtained allows us to use probability to gauge where an underlying asset may stay whilst avoiding outlandish price targets crated by our emotional hopes.
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