An example due to the recent market turbulence…NVDA has earnings coming up. If you look at IV rank vs HV, you'll see that HV (purple line in lower graph) is higher than previous, and IV rank is going up (due to earnings) but less than HV.
The sell vol crowd loves when IV rank is high as IV trends towards HV, but in this case HV is higher than IV…would you buy options ("they are cheap") or still sell (HV and IV are out of whack). I'm curious what analysis you'd perform and what options strategy you'd use in relation to that analysis.
Thx!
Educate me on your analysis process and strategy if IV < HV with earnings
byu/monkies77 inoptions
Posted by monkies77
1 Comment
You’re comparing apples and oranges. HV is historic, looking backwards. And IV is looking forwards. Comparing them can only be done after the fact. If you off set hv with 30 days.
We tend to look at an average of HV to determine if IV is high or low.