I had been struggling wiht this --------- simply amazing Mike
@guillermoguijarrorodriguez2526 жыл бұрын
Very good video, thank you very much, I understood everything. Simple and concise how it should be. Keep doing this videos you are very good
@tastyliveshow6 жыл бұрын
Thank you! We appreciate your support!
@SlumdogWunderKid6 жыл бұрын
Great, concise explanation on what the volatility smile is and why it exists. Thanks for your time!
@healingh2o5 жыл бұрын
Thanks for excellent video.
@jeffreyjohnson75612 жыл бұрын
Can't talk skew without covering the impact of going ex-dividend within the options' DTE. The puts will be richer than the calls by the expected dividend amount, adjusted for any strike vs underlying delta.
@bricendaes69083 жыл бұрын
Hello again Mike, If there’s a volatility skew to the put side, are the credit put spreads worth less than the call spreads? Is it because the long put position is more expensive than the long call position?
@rachitjain49902 жыл бұрын
Thank you for the information
@jigyasamaheshwari75824 жыл бұрын
Hey you mentioned that puts are OTM when the share price is low . Just to get clarity , isin’t puy OTM when share price is greater than Strike Price ?
@tastyliveshow4 жыл бұрын
Correct - puts are OTM when they are below the stock price. What timestamp are you referring to?
@rodrigopoppe2 жыл бұрын
Super great! Thanks
@asifmohammad29633 жыл бұрын
in reverse skew sometimes observe that put writers closing existing position and market go down..............
@zebra22183 жыл бұрын
he hasnt explained the vital point - how to exploit the skew? or may be another video on this will help the followers.
@DeebzFromThe90s3 жыл бұрын
did you find any videos on this?
@jeffreyjohnson75612 жыл бұрын
Short the underlying, buy calls, sell puts at same strike...(almost) zero risk. Only two risks: 1) a change to the dividend if stock goes ex-div within the option horizon and 2) the puts being exercised early.
@manishmahendru21267 ай бұрын
Volatility is an aspect of extrinsic price and it increases and decreases with option prices??? Wow!
@ShubhamYadav-ol4sf4 жыл бұрын
Thank u so much suggest Books.
@yvesforgues80684 жыл бұрын
Thanks for explaining this
@lia55lee4 жыл бұрын
Hi Mike, you mentioned that at time of reverse skew, people are selling calls and that decreases theirs prices. So how does that work well with the fact that you collect premium selling calls, when you are aiming to recieve the highest premium for them, but yoy mentioned that their price is going down..?
@tastyliveshow4 жыл бұрын
This is actually the reason why selling naked calls is something I almost never do, unless it's paired with a short put or the skew isn't that bad - if the skew is really strong on the put side, I sell a put or a jade lizard, which maintains no risk to the upside.
@harveybirdman5934 жыл бұрын
tastytrade curios to know how selling a put hedges your sold naked call? Is it just because you’re collecting premium on the put side? Don’t you still have unlimited risk on the upside though?
@wajihchtiba343 жыл бұрын
@@harveybirdman593 @tastytrade i have the same question
@heraclesphaeton6 жыл бұрын
I don't think this is it. This isn't how you go about explaining volatility smile. Basically fear has a bigger impact than greed. So when market crashes, it crashes fast. When market rises, it rises slowly. So, being short on put is having a significantly higher risk than being short on call. So, the premiums are distributed according to those risks - and hence the premium the put sellers demand for the higher risk they are taking than call sellers - is higher.
@holdencarkner81735 жыл бұрын
Being short on a call is technically riskier than being short on a put because when you sell a call you take on the risk that the underlying asset could technically rise to an infinite amount resulting in an infinite potential loss while selling a put only takes on the risk that the underlying asset could technically only drop to 0
@tastyliveshow5 жыл бұрын
It really depends on how you perceive risk - see Holden's comment below - would you rather sell a put 10 points OTM for a higher premium than a call that is 10 points OTM for a much lower premium? Regardless of velocity prior to expiration (which there is merit to, but this should be accounted for upon trade entry by not trading too big), where would you rather place your risk? That's the question at hand. There's no right or wrong answer, but a short put does not have significantly more risk than selling a call. I've seen 50 point market rallies in a single day, so the notion that markets grind up slowly is not always true, and I've seen violent down days as well.
@rotagbhd5 жыл бұрын
@@holdencarkner8173 That is only true for a naked call. A covered call only can be a loss if the premium and strike equal less than the cost basis. Leaving money on the table is not a loss, it's a miss of more profit. A loss is when you finish with less than with what you started.
@manmohansingh70493 жыл бұрын
Thanks for the nice information
@robertmitchell86302 жыл бұрын
Smile versus smirk 😏
@elizabetlonghorn9205 жыл бұрын
what does trading "richer" mean?
@tastyliveshow5 жыл бұрын
It means they are more expensive - if XYZ is at $100 and we compare the 80 strike put and the 120 strike call, if the 80 strike put is trading for $2.00 and the 120 strike call is trading for $1.00, that would be a normal volatility skew environment where OTM puts are trading "richer" than equidistant calls.
@rakeshgunijan54012 жыл бұрын
Is Volatility skews because of more demand on OTM puts than OTM calls rather than more calls being sold as mentioned at kzfaq.info/get/bejne/mbyBqMeW2Ki5k3U.html? Is is more to do with demand-supply theory where demand drives the price up?
@esji87367 жыл бұрын
Whats the intro song?
@rotagbhd5 жыл бұрын
Led Zeppelin's "Bring it on home"
@MrCpark4 жыл бұрын
How did he get the rights ?
@musama87714 жыл бұрын
@@MrCpark probably not monetized
@MrCpark4 жыл бұрын
How did this guy get the rights to use Zeppelin?
@tastyliveshow4 жыл бұрын
www.ascap.com/
@VinoWoods4 жыл бұрын
Mike is so hot, oh yea, good information also 😂
@seaninthecity60344 жыл бұрын
Lol volatility is not a factor in the option pricing model!?!?
@tastyliveshow4 жыл бұрын
volatility is a factor at the end of the day, but it's not an observable factor that you can input from the start, you have to back into the IV% given all the other inputs in the model. In other words, IV% is derived from option prices, not the other way around.