Get started

Volatilty

Options: Why the Odds Are Stacked Against YouThe Hidden Challenges of Options Trading: Options trading may seem like an exciting way to profit from market movements, but beneath the surface lies a trading environment that is heavily biased against individual traders. Many retail investors jump into options trading unaware of the many disadvantages they face, making it more of a gamble than a calculated investment. In this post, we’ll explore the major challenges that make options trading so difficult for individual traders and why you need more than luck to succeed. 1. The Odds Are Biased: Complex Algorithms Unlevel the Playing Field The first thing to understand is that the playing field is not even. Professional traders and market makers use complex algorithms that evaluate a wide range of factors—volatility, market conditions, historical data, time decay, news and more—before they even think about entering a trade. These systems are designed to assess risks, manage exposure, and execute trades with a precision that most individual traders simply can’t match. For an individual trader, manually analyzing these factors or using basic tools available online is nearly impossible. By the time you’ve analyzed one factor, the market may have already shifted. The reality is that unless you have access to these advanced algorithmic systems, you're trading with a massive handicap. 2. Market Makers Hold the Upper Hand: Your Trades Are Their Game Market makers play a critical role in options trading by providing liquidity. However, they also hold an unbeatable advantage. They see both sides of the trade, control the bid-ask spreads, and use their position to ensure they’re on the winning side more often than not. For them, it’s not about making speculative bets; it’s about managing risk and profiting from the flow of orders they receive. When you trade options, you're often trading against these market makers, and their strategies are designed to maximize their advantage while minimizing their risk. This means your trades are, in essence, a bad gamble from the start. The house always wins, and in this case, the house is the market maker. 3. They Will Fool You Every Time: Bid-Ask Spreads and the Math You Don’t See One of the most overlooked challenges in options trading is understanding the bid-ask spread. This spread represents the difference between the price you can buy an option (ask) and the price you can sell it (bid). While this may seem straightforward, it’s an area where professionals easily outsmart retail traders. Advanced traders and market makers use complex mathematical models to manage and manipulate these spreads to their advantage. If you don’t have the mathematical skills to properly evaluate whether the spread is fair or skewed, you’re setting yourself up to overpay for options, leading to unnecessary losses. 4. Information and Tools: A Professional-Only Advantage Another critical challenge is the vast difference in information and tools available to retail traders versus professionals. Institutional traders have access to data streams, proprietary tools, and execution platforms that the average trader can only dream of. They can monitor market sentiment, analyze volatility in real-time, and execute trades at lightning speed, often milliseconds faster than any retail investor. These tools give professionals an enormous edge in identifying trends, hedging positions, and managing risk. Without them, individual traders are flying blind, trying to compete in an arena where the best information is reserved for the pros. 5. Volatility and Time Decay: The Ultimate Account Killers Two of the most critical factors in options trading are volatility and time decay (known as theta). These are the silent killers of options accounts, and pros use them to their advantage. Volatility: When volatility increases, option prices go up, which might sound great. However, volatility is unpredictable, and when it swings in the wrong direction, it can destroy your position’s value almost overnight. Professionals have sophisticated strategies to manage and hedge against volatility; most individual traders don’t. Time Decay: Time is constantly working against you in options trading. Every day that passes, the value of an option slowly erodes, and as expiration approaches, this decay accelerates. For most retail traders, this is a ticking time bomb. Pros, on the other hand, know how to structure trades to profit from time decay, leaving amateurs at a disadvantage. Conclusion: Trading Options Is No Easy Game The challenges of options trading are real and significant. Between the advanced algorithms, the market makers’ advantages, the mathematical complexities of bid-ask spreads, and the tools and information reserved for professionals, the odds are stacked against you. Add to that the constant threat of volatility and time decay, and it’s clear that options trading is a difficult and often losing game for individual traders. If you’re thinking about jumping into options trading, it’s crucial to understand the risks involved and recognize that the deck is stacked. To succeed, you need more than just a basic understanding—you need tools, strategy, and a deep awareness of how the pros operate. Without that, you're gambling, not trading.
NASDAQ:NVDAEducation
by CF_444
BTC Bullish Outlook Based on BVIV Indicators (Oct 2024)Overview: I’m seeing a strong bullish signal for BTC based on the latest data from the Bitcoin Volmex Implied Volatility Index (BVIV) and related indicators. Here’s why I believe the current setup favors a potential move to the upside. Technical Analysis: BVIV (Volatility Index): The BVIV is trending lower, signaling that implied volatility is cooling off. Historically, declining volatility often precedes price stabilization, which can be a precursor to a bullish breakout. While the Z-score hasn't crossed below 0 yet, the trend suggests that this could soon happen, reinforcing the idea that the market is bottoming out. ATR Percentage: The ATR% is nearing the midline, and a break above it could indicate the start of increasing price action. This typically signals momentum building up for a larger directional move. Given that volatility is cooling off, I interpret this as a bullish signal for BTC. Z-Score of RSI: The Z-score of RSI has yet to cross below 0, but it is approaching the threshold. Once it does, it would further confirm the dissipation of overbought conditions and signal that bearish momentum is fading, adding strength to the bullish case. Macro Factors Supporting BTC: Institutional Adoption: With Bitcoin ETFs progressing toward approval and increasing institutional interest, BTC is poised to benefit from a shift in market sentiment. Global Liquidity Trends: Central banks have recently softened their stance on aggressive rate hikes, improving liquidity conditions for risk-on assets like BTC. This shift could support a price recovery. Safe-Haven Narrative: As inflation remains a concern, Bitcoin could reclaim its narrative as a store of value, particularly if traditional assets struggle amidst ongoing economic uncertainty. Post-Halving Cycle: Bitcoin is now several months into its post-halving phase (April 2024), a period that has historically seen significant price appreciation as supply constraints kick in. We could see this dynamic continue to play out, especially as the market anticipates further price gains in the months to come. Conclusion: Based on the alignment of these technical indicators and broader macroeconomic factors, I believe BTC is poised for a bullish breakout. While implied volatility is decreasing, rising ATR% suggests momentum is building for a strong move. I’ll be watching for confirmation of the Z-score crossing below 0 on the BVIV and ATR% breaking above the midline for additional conviction.
VOLMEX:BVIVLong
by LordGiorgioCapital
BTC Beginning of the Month Downward VolatilityBYBIT:BTCUSDT Seems we typically experience some downward volatility in the first week of each month since June. I certainly have noticed a trend: July 4/5 bottom, Aug 5 bottom, Sep 6 bottom. Let's see what the rest of the week has in store for us. -- -- -- -- Using the 50 period on the 12H for the ROC it seems we could be near a local top which has shown some tops/ bottoms in the past during this range. The blue boxes represent the beginning week of the months. YOY global liquidity is on the rise due to China easing significantly.
by bhx10
Major earnings are times to hedge or BTDAs far more eloquent and technical writers have covered (spotgamma, etc) - it's very clear that the markets in general are driven by single name options on the largest market cap companies. And to help visualize just how much volatility can happen around earnings on these single names, I wanted to be able to visualize those earnings dates and impacts against some of the major benchmark ETFs like SPY or QQQ. So far, I hadn't seen a place that gives this a more clear presentation so here is my first attempt at visualizing just how large the ripples are from the "megacaps" (AAPL, MSFT, NVDA, TSLA, etc) in a very "glanceable" way. Introducing this indicator here first! Earnings Date Highlighter - from0_to_1 Easily see the earnings dates from top market movers or the top holdings of your favorite ETF!
NASDAQ:QQQEducation
by from0_to_1
QQQ is showing to be rather volatileQQQ is showing to be less predictable and prone to false breakouts Last week QQQ performed a two day long false breakout above before retreating Today we see QQQ again break below its downward trend. breaking below a downward trend is usually followed by a course correction back into the normal trading zone QQQ is proving to be volatile and thus difficult to define when a trend is actually reversing or just another fake out that takes our money.
NASDAQ:QQQShort
by ratchet-mint
Option Chain Before Earnings - $NVDA huge CALL skewThis week, keep an eye on NASDAQ:NVDA , which will release its quarterly earnings on Wednesday. Here are this week’s earnings releases implemented by the TanukiTrade Options Overlay indicator for Tradingview: 08/28 Wednesday after market close: NVDA , CRWD , CRM 08/29 Thursday after market close: MRVL The Options Overlay indicates that NVDA's call skew is above 55% at 54DTE, meaning that CALL options are priced 55% higher than PUT options for the binary expected move distance . This suggests that the market is pricing in a strong upward move. The yellow curve represents the binary expected move, while the blue curve shows the 16-delta OTM options. The green rectangle highlights the area where you can potentially profit from the butterfly trade if the earnings report meets bullish market expectations. Upward price levels: 7/8 - 138 8/8 - 150 Downward price levels: 6/8 - 125 5/8 - 112 If you agree with the market’s bullish sentiment, one of the best R:R trades might be a directional NVDA call butterfly. You can buy it for $109 with the nearest Friday expiration, with a maximum (theoretical) profit of nearly $900. It’s worth executing this trade before the earnings announcement. Note that the green dashed line is theoretical; while it's not a traditional trendline according to classic TA, the long-term upward trend is still quite clear Expiry: Aug 30 Legs: 1x140C -2x150C + 1x160C Net debit: ~$100 Max profit: $890
NASDAQ:NVDALong
by TanukiTrade
How Experienced Traders Navigate VolatilityIn today’s turbulent markets, it is a timeless reminder to discuss volatility, how experienced traders can navigate volatility and manage their risk, and why it’s important to always be prepared. Recently, we saw dramatic price action with the USD/JPY pair influenced by the Bank of Japan’s policies or even gold’s march to all-time highs against the Dollar. In this post, we’ll be discussing the art and science of volatility in forex markets and aim to remind all traders about what it is and how to deal with it. Understanding Forex Volatility Volatility is quite simple, despite sounding complex. At its core, volatility measures how much a currency’s value deviates from its average. High volatility means more significant price swings from its average and low volatility means less significant price swings or a lack thereof. Now that you understand the basics, let’s move on to the next concept – trading around volatility and the associated risks. Trading in Volatile Markets Experienced traders know that volatility will spike at some point in a market cycle. Throughout market history there have been many examples of this, and volatility spikes can correspond with market crashes, unexpected economic figures, and major news events, such as elections or wars. These volatile moments may present opportunities to the prepared trader, but it is also equally important to manage your risks in these scenarios. Therefore, the first step to this is crucial: be fully equipped for it. Know The Risks Experienced traders can find potential opportunities in volatility, as mentioned above, but it also means more risk because of potentially higher spreads, faster and unexpected price movements, and larger percentage moves in either direction. That’s why it’s important to assess your risk tolerance before diving in, and once again, be prepared for volatility to strike at any moment. Technical Indicators for Volatility There are several technical indicators that you can employ on your charts to measure volatility in the currency pair that you’re analyzing. We’ve compiled a small list below to get you started, but please keep in mind that there are many more to share in an upcoming post here on TradingView, so please stay tuned for more updates from us: Bollinger Bands: Measures and displays a currency pair’s standard deviation. Average True Range (ATR): Shows the average range of symbols over specific periods of time. Relative Strength Index (RSI): Measures price change and size. We Know Volatility We’ve seen booms and busts, and presidents come and go over our 20+ years working in forex markets, but throughout that time we’ve remained steadfast, providing traders with the education, resources, and tools they need. That’s why we publish content like this to ourus official TradingView profile – be sure to follow along.
Education
by FOREXcom
$BABA volatility pricing skew on CALL side before earningsThe high vertical CALL pricing skew on the options chain shows that the CALL options for the September expiration are already much more expensive than the PUT options at the same expected move distance. This suggests that market participants are pricing in an upward move. Let's take a closer look at the probability curve formed by the options chain. I'm very curious to see whether the 8/8 to +1/8 quadrant line will hold the price for BABA, or if it will continue to surge into the Upper Extreme quadrant, heading towards +4/8 until $100. If everything stays the same, something like this could be an interesting lottery ticket for me. I'm thinking about an OTM call butterfly with a short expiration before earnings. I have to admit, I’m not a big fan of risking on this red/black roulette type of play, but if things stay as they are, I might consider combining it with a 40 or 68DTE credit put ratio below and the call butterfly above before earnings. But we'll see how things look on the day before earnings!
NYSE:BABA
by TanukiTrade
Update: VIXIts been a while but those who follow me know I posted extensively about the VIX months back and as we can see, the VIX is very much in the news lately due to its current historical spike. It was not one of the more popular topics at the time I was talking about it but as you can see on this chart outlined here, that this is an extremely powerful resource and should be one of my most popular posts in my opinion. The VIX was and still is highly accurate in regard to being an indicator of when to be risk on vs risk off. The levels I drew have been respected for the last few years perfectly and historically after we've seen sudden spikes, they were short lived and the index came back down to levels that were very friendly to bulls. Historically, the last time volatility was at this level, Covid Pandemic had just happened. Shortly after markets rallied 100% before finally entering a bear market TWO YEARS later. In the coming weeks keep an eye on the VIX to see if it returns back below 15 basis points in that sweet Buy and Hold area that I have labeled on the chart.
TVC:VIX
by TradeVibez
VIX Remains Rangebound ....for nowThe VIX remains rangebound and in very good territory all things considering geopolitically and globally. No one can predict the future with 100% certainty but as long as there isn’t any earth-shattering news, fear will probably remain low, given the exception of U.S. election shenanigans coming up. Be aware here that my prediction is that at the last second (and really when it is far too late) they will pull Biden out of the race. Many will not be expecting this (though, I am astounded at how they will not) and it will cause massive volatility in our markets again before settling down. But we have all summer and into the fall before we begin to see some of this occur.
TVC:VIX
by stewdamus
EUR/USD week 15 analysis/outlookLast week, the EUR/USD market was a whirlwind of activity, marked by heightened volatility and significant price swings. The week began with bullish momentum, as buyers took charge and pushed prices higher. However, by midweek, the market experienced a dramatic shift, with increased selling pressure leading to sharp declines in the EUR/USD pair. Despite the tumultuous nature of the market, traders were presented with ample opportunities to capitalize on the volatility. Profit levels soared during periods of heightened activity, particularly on Wednesday, when profit levels far exceeded expectations. However, the increased volatility also posed significant challenges, with rapid price movements catching many traders off guard. Looking ahead to next week, I anticipate continued volatility in the EUR/USD market. While there may be some attempts at recovery, the overall sentiment remains uncertain, with the potential for further downside pressure. Traders should remain cautious and vigilant, closely monitoring market conditions and adjusting their strategies accordingly.
by RobertD7723
Yemi_Fx1 | BEARISH SETUP ON AUDJPY Maintaining a sell bias on AUDJPY based on the presence of a well-defined sell structure. On the 1-hour timeframe (1HTF) shows the bearish bias is further supported by a potential continuation pattern in the form of an ascending wedge, with price currently testing resistance. Be aware that today's high-impact Non-Farm Payroll (NFP) data release could cause price to break out of the ascending wedge resistance before moving in it main direction. I anticipate a potential third touch of the ascending wedge's resistance. If price rejects this level, we can look for a confirmation shorting signal(A flag )on a lower timeframe (e.g., 15-minute chart) to enter the trade. If you found this helpful please support your fellow trader with a like .
Short
by Yemi_Fx1
❤️GOLD pulls back before $2,100❤️❤️MY FOREX TEAM❤️ INFORMATION Gold is taking a breather after testing the three-month high at $2,088 in early Asian hours on Monday. The US Dollar is looking to find its feet alongside the US Treasury bond yields, as markets resort to repositioning ahead of the high-impact economic events from the United States this week. 💲BUY / SELL SIGNAL UPDATES SHORTLY💲 Follow channel for regular updates Everyone success..👍👍👍 ❤️MY FOREX TEAM - Technical Analysis Technical indicators SMA | EMA | MACD | SAR | VWAP | RSI | MARKET TREND | NEWS ❤️NOTE Gold pulls back before re-attempting $2,100 ❤️MONEY CAPITAL MANAGEMENT ⚡️ Only Trade With Risk Capital ⚡️ Cut Losses Short, Let Profits Run On ⚡️ Avoid Using Too Much Leverage ⚡️ Avoid Taking Too Much Heat ⚡️ Do Not Give in to Greed ⚡️ Take profit equal to 4-6% of your capital ⚡️ Stop lose equal to 2-3% of your capital
FOREXCOM:XAUUSD
by My_Forex_Team
XAUUSD FOMC UP then Downtrend❤️MY FOREX TEAM❤️ INFORMATION Gold (XAU/USD) rose for the fourth straight session on Tuesday (+0.50% to $2,027), firmly establishing itself above the $2,025 mark, supported by declining U.S. Treasury yields and a subdued U.S. dollar, with risk-averse sentiment on Wall Street likely reinforcing the metal’s advance. 💲BUY GOLD 💲 💲SELL GOLD 💲 Signal Updates in chart. Followers continuously receive update. Everyone success..👍👍👍 ❤️MY FOREX TEAM - Technical Analysis Technical indicators SMA | EMA | MACD | SAR | VWAP | RSI | MARKET TREND | NEWS ❤️NOTE FOMC MINUTES IN FEW HOURS ❤️MONEY CAPITAL MANAGEMENT ⚡️ Only Trade With Risk Capital ⚡️ Cut Losses Short, Let Profits Run On ⚡️ Avoid Using Too Much Leverage ⚡️ Avoid Taking Too Much Heat ⚡️ Do Not Give in to Greed ⚡️ Take profit equal to 4-6% of your capital ⚡️ Stop lose equal to 2-3% of your capital
FOREXCOM:XAUUSDShort
by My_Forex_Team