Hi All, I am into trading on Bank Nifty Options (NSE, India). It is highly volatile - which is the best indicator to use while trading such Options / shares? thanks
when trading shares, look at the IV on the ATM options. Low IV = everyone knows what the fair value of the stock is, likely to move in consistent trends or sideways, VERY difficult to trade. high IV = nobody knows where the fair value of the stock is, mean reversions occur frequently, or massive breakouts, money to be made trading in both directions. when trading options, look at the IV on the tails (OTM) legs. smart money usually buy these to hedge against near term catastrophies/panic rallies. The greater the IV on these vs ATM, the more likely someone who has an information edge is buying them. take note these work well for NA/European securities. Idk too much about India.