IV is a fear indicator. If any big player unwind his position, we can know it from Vol and OI. OI will decrease but what will happen with premium and IV ? If they place a limit order, premium will not go down at large scale. So, IV will increase on unwinding or it will decrease. I read so much on it but confused on this point. Any clarification on this would be highly appreciated.
Unwinding of position does not necessarily mean that it is done by big player. It can be by retail investors also if their stop loss is hit. You have to check the smart money flow and then decide who is unwinding? If big player is unwinding then definitely it will impact IV and Premium.
I shared a video on how to find correlation coefficient between the IV and the stock price. IV may increase or decrease.
Viewing 1 reply thread
The topic ‘ Option chain and IV’ is closed to new replies.