What is Volatility Carry? | Options Education
What is Volatility Carry? Macro Options Spotlight | February 23, 2023 Get a Free Month of Options Insight Right Now when you use the code: RV2023 at checkout. Options Insight Products: https://options-insight.com/products/ Check out our Options Trading Courses: Real Vision: https://realvision.com/academy/courses/imran-lakha-options-trading/welcome/intro-meet-imran?autoplay=true&tab=details SpotGamma: https://academy.spotgamma.com/link/NcCMsu Options Insight is your number one source for understanding volatility and options markets to take advantage of macro trade opportunities across the major asset classes. Using our proprietary Volatility Dashboards, you can quickly scan across the critical inputs needed to gauge vol and spot metrics for spotting trade opportunities. One of our key metrics to understand whether it's a good time to be buying options is a term called Volatility Carry. TLDR: Vol Carry = Implied Vol - Realized Vol. But there's more to it than that, so watch the video and start taking your options education to the next level! 𝞂 Chapters 𝞂 00:15 | Introducing Volatility Carry 00:33 | Carry Refers to Theta (Time Decay) 00:50 | Earning Carry 01:12 | Closer Look at Our Volatility Dashboard 01:43 | Equation for Volatility Carry 02:50 | How to Read Our Carry Indicator 04:00 | Positive Carry vs. Negative Carry #optionstrading #optionsinsight #macrooptions #volatility #vol #stocks #macro #volatility #vix #yieldcurve #yields #rates #bonds #equties #usequities #volatilitycarry #volcarry #carry Get daily actionable macro trade ideas with Options Insight's Macro Options Daily and weekly portfolio construction with Options Insight's Macro Options Overlay. Subscribe to the Options Insight channel for cross-asset summaries and tips about using options overlay strategies to mitigate risk and maximize returns! Keep up with options and volatility dynamics on Options Insight socials! https://twitter.com/options_insight https://www.youtube.com/c/OptionsInsight https://www.options-insight.com/ DISCLAIMER OPTIONS INSIGHT CONTENT is presented for educational purposes only. The information presented by OPTIONS INSIGHT should NOT be construed as investment advice. Always consult a licensed investment professional before making important investment decisions. The opinions expressed by OPTIONS INSIGHT are those of its founder Imran Lakha who shall NOT be liable for losses resulting from investment decisions based on information or viewpoints presented by Options Insight. Investors Hold Onto Hope as SPX Tests Major Support Levels Macro Options Spotlight | February 23, 2023 https://youtu.be/b1Pv5Gz5h7c
What is Volatility Carry? | Options Education
Understanding Volatility Carry
In this video, the speaker explains the concept of volatility carry and how it is used in trading. The speaker compares implied volatility with realized volatility to determine whether to buy or sell options.
What is Volatility Carry?
- Volatility carry refers to the Theta associated with options.
- Time decay affects options, meaning that if you buy options, you lose time decay, and if you sell options, you earn time decay.
- If you sell options, you are earning carry. If you buy options, you are paying carry.
How to Determine Whether to Buy or Sell Options
- Compare implied volatility with realized volatility of an asset.
- Calculate the difference between the average one week and one month implied volatility and realized volatility to get the volatility carry.
- Use historical context to understand whether a positive or negative volatility carry is average or extreme.
- A positive volatility carry suggests selling options may be profitable while a negative one suggests buying them may be more profitable.
Applying Volatility Carry in Trading
- Screen for assets with positive or negative carry every day before deciding whether to be long or short gamma based on positive or negative carry.
- Extreme color coding shows when we're in extreme circumstances (90th percentile and above = bright green; zero to Tenth percentile = yellow).
Overall, understanding volatility carry can help traders make informed decisions about buying and selling options based on their expected profitability.