Arrush Jagan asked 3 years ago High Volatility or Low volatility. Out of two which is the preferred one? How to gauge whether the stock is in High Volatility or Low Volatility? Market Volatility or Stock Volatility – which one is preferred and how to gauge them. Thanks
Owen Staff answered 3 years ago Hi Arrush,
Typically, Volatility is a term used in conjunction with options as it applies to choosing the best option to establish a position aligned with the underlying. A good source to determine volatility is iVolatility.com
Of course the term volatility can be applied to stocks in that one stock can move a lot (e.g. TSLA), but we certainly don't avoid it; we embrace it at the right price when there is a clean entry.
As for Market Volatility; the VIX is typically the go to gauge. When the VIX is high, volatility (Fear) is high. Obviously, it is a comparative value in relation to historical values.
Finally, circling back to options volatility; the question arises, How do I know when volatility is low? The simple, almost too simple, answer is, When volatility is not high. Because volatility, as it relates to options, is relevant only to historical value, you can see where this simple, and correct, conclusion is drawn.
Hope that helps!
Owen
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Thanks Owen for the explanation….