3. IV is function of how frequently option is traded.
It should be analysed with help of OI —-
PE IV is going up and CE OI is increasing and This increase should be opening of new contracts then market should go up.
CE IV is going up and CE OI is increasing and this should be new opening of contracts then market should go down.
This is at the money observation.
Out of the money PE should show decay if INDEX needs to go up.
Out of the money CE should show decay if INDEX needs to go down.
