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Can the Price of Fear Predict Tomorrow's Volatility?

decoded from tastyliveoptionsTrainingWatch on YouTube

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ticker lesson

Breakdown

0:00lesson

Volatility and price relationship study

Study uses IV, volatility, volume, price
Questions about IV predicting price
IV rank compares current IV to historical data

2:03lesson

IV rank and price correlation

IV rank reflects market fear
Low price correlates with high IV rank
IV rank predicts next day IV fall

4:11lesson

Volume and IV rank correlation

Volume highly correlated with IV rank
Magnitude of price move affects volume
Feedback loop between volume and IV

6:23lesson

Same day price and IV correlation

Same day price and IV have 72% correlation
Next day correlation weak
Market down, volatility down

8:32lesson

IV rank predicts medium-term IV change

IV rank shows slope of IV change
Low IV rank predicts +3.5% IV
High IV rank predicts -6.3% IV

10:31lesson

Volatility mean reversion

Volatility is mean reverting
IV rank above 30 predicts fade
VIX spikes revert to 20s/teens

10:32lesson

Takeaways on volatility screening

Focus on IV matrix for fear signals
Price levels explain only 1% of IV
Use rising volume and IV rank for screening

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