If you want to make a fortune trading stocks and options online, you will need to have a good understanding of volatility.
volatility - measures the amount the underlying is expected to flectuate in a given period of time.
So, high volatility means the price of the underlying stock or option can change dramatically in either direction in a short amount of time. Low volatility means the change in price is not dramatic in a short amount of time.
If you are buying options, you usually want to buy when the volatility is low. This is because the option is cheaper when the volatility is low. Even if the price of the underlying doesn’t move and the volatility suddenly increases, the price of the option will go up. In fact you can even trade volatility by trading the symbol VIX.
If you are selling options, the opposite is true. You want to sell the option when volatility is high so you can sell a higher price.
