What does Implied Volatility mean on a Call Option

Implied volatility is a measure of the market's expectation of the future volatility of the underlying asset, based on the prices of options contracts. In the context of a call option, implied volatility refers to the level of expected volatility that is implied by the market price of the option.

A call option gives the holder the right, but not the obligation, to buy the underlying asset at a predetermined price (the strike price) on or before a specific date (the expiration date). The value of a call option is influenced by several factors, including the price of the underlying asset, the strike price, the time until expiration, and the implied volatility.

Implied volatility represents the market's perception of the likelihood of significant price movements in the underlying asset over the life of the option. A higher implied volatility implies a greater expected range of price movement and therefore a higher likelihood of the option reaching the strike price before expiration. As a result, a higher implied volatility generally leads to a higher price for the call option. Conversely, a lower implied volatility implies a lower expected range of price movement and therefore a lower likelihood of the option reaching the strike price, resulting in a lower price for the option.

Buying Calls that expire the same day

There is a lot of money to be made in buying calls that expire the same day.

THE THEORY:

Buying a call option that expires the same day can potentially provide benefits such as:

1. Lower cost: Options that expire on the same day typically have lower premiums, or the price that an investor pays to purchase the option, compared to options with longer expirations. This can make it more affordable for investors to speculate on short-term price movements.

2. Quick profits: If the underlying asset's price moves in the desired direction, the value of the call option can increase rapidly. This can allow investors to make quick profits in a short amount of time.

3. Limited risk: When buying a call option, the maximum loss that an investor can incur is limited to the premium paid for the option. This means that investors have limited risk exposure compared to buying the underlying asset outright.

THE STRATEGY:

So with that information out the way i am going to show you how i made 20% on TSLA using a particular strategy. The was done today May 5th 2023 and while it is risky I will show you all the tools and resources I used to pull this off.

1. I use different resources to identify a Call on TSLA that expired today to get my strike price and check the volume. I want a 4 digit volume or better.  This only works on stocks that are very volatile so TSLA is perfect. See My previous post.

2. I then use the 15 minute chart on Trading View to check for an upward trend and draw my line to the anticipated price mark.

3. I then find and buy the call on Robinhood and check to make sure the Greeks are looking good.

4. I set my alert for the price mark and I get out once it hits the mark. 

5. I try to stick with My 20% profit rule and not get greedy. 

For stocks like TSLA this works on a Friday but others like SPY have more than one expiration day for the week.

THE RESULTS:

THE CONCLUSION:

However, it's important to note that buying options with very short expirations can be risky and speculative. Options with short expirations are more sensitive to changes in the underlying asset's price and can quickly lose value if the price doesn't move in the desired direction. Therefore, buying a call option that expires the same day is generally considered to be a high-risk, high-reward strategy that should only be used by experienced traders who can manage the risks involved.