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Volatility and Direction

From Theory To Practice

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Much like we saw with Time and Direction, the connection between volatility and direction is largely dependent on the moneyness of the option. In other words, in-the-money options and out-of-the-money options are not affected the same way by changes to implied volatility. Kai joins the conversation today to help us flesh out this very idea, and he adds the nonlinearity of delta back into the discussion.

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