What is implied volatility (IV)?Implied Volatility (IV)

After selling an option, use the stock to offset its price risk. But Delta changes with the stock price, so the hedge has to keep adjusting.

Sell a near-month option and buy a far-month option at the same strike. The near month's time value melts fast and the far month's slowly; if the stock sits near the strike, that speed difference is your profit.

Sell a strangle to collect premium, then buy protection further out on each side. Risk is capped, and you make money if the stock stays in the range.

Before earnings everyone rushes to buy options and IV gets pushed up. Once the results are out, uncertainty vanishes and IV drops instantly, so you can lose money even if you called the direction right.

Not sure whether it'll go up or down, only that it'll move a lot? Buy a call and a put together. Same strike is a straddle; different strikes is a strangle.

Option prices hide the market's expectation of future swings. Work backward from the price and you get implied volatility; how much the option price changes per 1 percentage point of it is Vega.

Buy one option and sell another of the same type at a further strike: it costs less, and both the gain and the loss are capped.

For the same stock and expiration, different strikes have different implied volatilities. Downside puts on stocks are often pricier: the market charges extra for "crash" insurance.