MTM Options Trader Newsletter | How Implied Volatility Affects Vertical Debits

[image]( [image] This Week in the Market It was a bullish start to the week as all-time highs were established for the S&P 500 and Dow. It didn’t last long, however, as stocks took a turn lower Wednesday and continued in that direction. Some might say the pullback was due as the market had been on quite a bullish run. The three major indexes are all still situated above their 50- and 200-day moving averages with Nasdaq being the closest to its 50-day. Because of this, a non-bearish outlook on the market makes sense but with a cautionary note. A continued move lower, especially with some perceived bad news on multiple earnings announcements expected this week, could push the indexes even lower. Implied volatility and option prices spiked higher. It is a slow start to the week as far as economic reports go, but then numbers accelerate. A couple of home sales numbers come early, and then the latest update to the GDP is on tap. Closing out the week is the latest consumer sentiment figure. At the time of this writing, there were no Federal Reserve speakers on the docket. Quarterly earnings are accelerating, with Tesla and Alphabet among the well-known companies expected to release their numbers this week. As always, check the expected earnings date before entering a trade, and have a safe, healthy and prosperous week! Jul 23: Existing Home Sales Jul 24: New Home Sales Jul 25: Jobless Claims Jul 25: GDP Jul 25: Durable Goods Jul 25: U.S. Trade Balance Jul 26: Personal Income and Spending Jul 26: Consumer Sentiment [Read Our Blog]() How Implied Volatility Affects Vertical Debits In contrast to historical volatility, which looks at actual stock prices from the past, implied volatility looks toward the future. Implied volatility (IV) is often interpreted as the market's expectation for the future volatility of a stock and can be derived from the price of an option. Specifically, IV is the expected future volatility of the stock that is implied by the price of the stock's options. But let’s make it even simpler by saying IV is how cheap or expensive options are. Below we will take a brief look at how IV levels can make vertical debit spreads cheap or expensive too. [Continue Reading …]( MTM Watchlist Here are a few trade ideas we will most likely consider in MTM’s group coaching class week: SPY – 0-DTE trade ideas continue to excel, and we will consider more this week. Iron condors and vertical credits have been stellar. NVDA – A neutral calendar was a big money maker this past week. You can expect us to discuss more neutral and directional calendars in class this week. PDD – The stock has made a move close to its 200-day moving average. Potential bull call and bull put spreads will be explored with a bullish reversal move. [image](=) The strategies in this newsletter are for educational and informative purposes only. All information disclosed in this newsletter should not be considered complete in its entirety. Market Taker Mentoring, Inc. will not be held responsible for changes, oversights, errors or omissions. Dates, prices, news and other information may not be accurate. Please verify all information before trading. You alone are responsible for your own investment decisions. Options involve risk and are not suitable for all investors. Before trading options, please read Characteristics and Risks of Standardized Option (ODD), which can be obtained from your broker; by emailing investorservices@theocc .com; or from The Options Clearing Corp., 125 S. Franklin St., Suite 1200, Chicago, IL 60606. No statement in this newsletter is intended to be a recommendation or solicitation to buy or sell any security or to provide investment or trading advice. Traders and investors considering options should consult a professional tax advisor as to how taxes may affect the outcome of contemplated options transactions. Copyright Market Taker Mentoring, Inc. 2008 - 2024. All rights reserved. Reproducing or redistributing this content is a violation of federal law. [image] If you do not wish to be contacted via email, you can unsubscribe using this link: [Unsubscribe]( Unsubscribing from email notifications DOES NOT cancel your class, subscription or recurring payments. We recommend that current students do not unsubscribe from email notifications. If you unsubscribe from email notifications, you will not be notified on how to access the classes or subscriptions in which you are enrolled. Market Taker Mentoring, Inc. PO Box 117 Frankfort, Illinois 60423 United States