Use Implied Volatility To Avoid Bad Option Trades

Implied Volatility: How to Avoid Losing Option Trades Even with the Right Trade Direction

In this video, we address a common frustration among option traders: losing money despite predicting the right market direction.

Using an example with SPY we demonstrate how expensive options can lead to losses even with an accurate market forecast. Nations Indexes' CallDex can provide insight into options pricing and guide smarter trading strategies, such as selling put spreads in high-cost environments.

Learn how to leverage volatility indexes to improve your trading outcomes and reduce losses.

00:00 The Frustration of Losing Money Despite Correct Predictions
00:34 Example: Bullish on SPY but Losing Money on Call Option Trade
01:12 Looking at Option Expensiveness
02:03 Picking Better Trade Structures with Volatility Indexes
02:31 Learning More

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Scott Nations is the President and Chief Investment Officer of Nations Indexes, the world’s leading independent developer of volatility and option cost indexes. Nations Indexes grew out of his previous work leading proprietary equity index option trading firms during 25 years as a floor trader at the Chicago Mercantile Exchange.

During that work his team created the Nations Indexes suite of option volatility and option cost indexes including VolDex® (ticker symbol VOLI) which measures implied volatility on the S&P 500 and TailDex® (ticker symbol TDEX) which quantifies how much investors are willing to pay to protect their portfolios.