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THE OPTIONS COURSE- OPTIONS AND THEIR BUILT-IN SENTIMENT INDICATORS

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THE OPTIONS COURSE OPTIONS AND THEIR BUILT-IN SENTIMENT INDICATORS The utilization of sentiment indicators has been common in the stock, fu tures, and options market for a long time. However, the difference for the  options market is that it inherently possesses its own sentiment indicators  and does not have to look outside to gauge or measure investor feelings.  The inherent sentiment indicators I am referring to come in the form of  implied volatility, option trading volume, option open interest, and  put/call ratios. All of these reveal important sentiment type information  about the markets.  First, implied volatility is a calibration of a stock’s volatility as im plied by the current price of the option.  Many times it is referred to as  the fear factor as it gauges the level of concern investors might have in  the markets at a particular time.  An option’s implied volatility is an ap proximation of the underlying equity’s volatility in the future. Estimating