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Options Selling Edge: Is Implied Volatility Lying to You?
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ticker lesson
Breakdown
0:00lesson
Implied vs Realized Volatility Core Concept
- Implied volatility overstatement is core to premium trading
- Study from 2016 to 2026 shows IV consistently higher than RV
- IVRV overstatement is key to consistent profits
1:42lesson
IV Overstatement and Volatility Regimes
- IV overstatement has widened in 2026
- 2026 year-to-date shows widest IV-RV gap
- Volatility regimes impact IV overstatement
3:26lesson
IV Overstatement and Tail Risk
- IV overstatement creates tail risk exposure
- Tail moves can be large in size and velocity
- Profit often with tail risk exposure
5:18lesson
IV and Near-Term vs Long-Term Cycles
- Implied volatility is not linear across timeframes
- Near-term cycles have higher implied volatility
- Implied volatility overstates near-term moves
7:03lesson
IV Overstatement in Different Volatility Regimes
- IV overstatement is measured via medians and averages
- Averages are more sensitive to tail events
- High volatility regimes reduce overstatement magnitude
9:01lesson
Cushion in Calm Years and IV Overstatement
- Cushion is highest in calm years
- IV overstatement rate is 88% in 2026
- Calm regime allows for higher premiums
10:55lesson
Takeaways on IV Overstatement and Trading
- IV structurally overstates realized volatility
- Premium seller edge is based on overstatement
- Tail risk is compensation for overstatement
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