Digging In To A VIX Basic

Hey Traders,

Well, we didn’t get a sub-15 close … but the VIX did gap lower on Friday morning and hit below 14.50 during the first half of the trading session.

So the VIX did break below the 15 level, like I predicted, thanks to the better-than-expected non-farm payrolls report.

It seems like traders are feeling pretty confident about the current state of the market …

After today’s market holiday, I don’t expect anything too surprising tomorrow … 

Since there’s no trading today, I wanted to take this chance to go over some crucial foundational knowledge for anyone looking to trade (or even interpret) the VIX …

Understanding implied volatility (IV) is essential for really understanding the VIX … since the VIX is implied volatility!

Here’s a video where I dig into IV, what IV truly is, what it tells us, and how this helps us interpret the VIX. I’ll even throw in a few sports metaphors, and a real-life example:

https://www.youtube.com/watch?v=UlbZ59J5BWw

“That’s great, Mark,” you may be thinking, “but I understand what implied volatility is, I just don’t get why it does what it does!”

Don’t worry, I’ve got that answer for you right here (warning: more sports metaphors ahead!):

https://www.youtube.com/watch?v=ntYF4jqHo3I

And finally, here’s an explanation of how market makers use implied volatility to determine their prices. 

If you trade options, this is some really good information to you help you understand options pricing:

https://www.youtube.com/watch?v=Yj6GrdOpUSU

Hopefully after watching those three videos, you’ll have a pretty solid grasp about what implied volatility is, and the effects it has on both the VIX and your trading!

Now get out there and enjoy the rest of the market holiday!

Your Only Option,

Mark Sebastian

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