Low Option Implied Volatility Levels

Implied volatility for options traders can give you a good idea of the market sentiment…

When there is low implied volatility (generally readings under 20%) we can assume that investors are over confident in the markets and that they are not protecting themselves from risk.

On the other hand, when there are high levels of implied volatility (generally readings over 30%) then investors are “too scared” which can lead to sharp rallies.

Currently we are still under the 20% level and have been for a while now. Remember that with volatility, anything can happen in the blink of an eye – so sitting on cash would be the best decision for now.