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3.5.2015 Learning/Understand Implied Volatility: Yesterday a trader bought 3000 LLTC May 52.5 Calls for $.25 My goal is to take the Speculative Trades, not Trades against Short Stock position. If a institutional trader buys Calls: What are their Greeks of LONG Calls: Delta: Long Gamma: Long Theta: Short Vega: LONG At the time LLTC May 52.5 Calls were $.15 bid at $.25 offer, 500 up Trader paid $.25 then the implied volatility goes HIGHER. The market maker might then be $.20 at $.30, 500 up If a trader buys May 52.5 Calls, they are BIG order, then the implied volatility in May will increase, as well possibly in March, April, June. Today, a trader bought LLTC March 49 Calls and April 50 Calls: Implied Volatility will INCREASE in other months such as May: 3.4.2015 The LLTC May 52.5 Calls were bought for $.25, Delta of 15. Today the stock was up $.70, so the Calls should increase about $.10 in value. Today the Calls are $.55, but should only be worth $.35. How is this possible? IMPLIED VOLATILITY ADT a trader bought 22,000 ADT April 43 Calls for $.30. The stock has increase $3 in value, the Delta of these Calls were $.10. In theory the Calls should increase in value $.30 from $.30 to $.60. The power of buying Out of the Money Calls. As the stock market goes down, implied volatility increases and as the stock market increases, volatility decreases. Where is this getting us? There are tips and tricks I can teach you about trading: 1. Realize when buy Out of the Money Calls, a trader needs FAR: Fast Aggressive Move in Right Direction 2. Be very careful when buying Calls when the stock market is lower. Stock market is down 500 points, implied volatility is higher. 3. So, when the stock is down, this is a GREAT time to Sell Put Spreads instead of buying Calls. When sell Put Spreads, you are selling Implied volatility. ADT April 43 Calls were $.30, Delta was 10, Vega was 5. Stock went up $1.00, Delta should move option up to $.40, but they are worth only $.30. How possible? Implied volatility went lower? The implied volatility went down 2 points.