Before you can understand the importance of volatility, it’s necessary to have a comprehension of this term in relation to investing. Essentially, volatility refers to the activity of a particular stock. It involves how frequently the stock shows activity and the direction it goes in terms of its price. When the price stays within a close range, the stock has low volatility. When there’s a broader range of price changes in a shorter period of time, the stock is highly volatile.
How Does Volatility Affect the Stock Market?
Volatility is also applied to the entire market as a whole. If the value of the market rises or drops significantly within a period of time, the market is highly volatile, but a market that only moves a few points within a day has low volatility. These changes in the market can be used to predict how it will fluctuate in the coming days or weeks. High volatility suggests individual stock prices will generally drop in the near future. …
COVID-19 has been many things. It’s a historically destructive pandemic that’s killed over 1 million people. It’s forced the temporary or permanent closure of thousands of small businesses. The pandemic has impacted big business in a big way, too. One way of seeing this is through stock market fluctuations since the start of the pandemic.
March of 2020 was the most volatile month on record for the Standard & Poor’s 500. This index follows the stock prices for 500 large companies, including big players like Johnson & Johnson, 3M, Amazon.com, and Microsoft. Having that much volatility for that many significant companies is never good news. …
Options trading refers to the buying or selling of index or security over a specified period. When strategically executed, Options trading is a great investment strategy that offers both individuals and companies an opportunity to make good profits. Some of the factors pointing to the importance of Options trading include;
Cost-efficiency
Options provide a buy price that is relatively lower than shares. By picking the right call to buy, an investor gets an opportunity to save more and make more in terms of profit. Options thus possess great leveraging power that, if adequately executed, opens an excellent income avenue.
Reduced risk
Another advantage of options is that it enables an individual to buy shares using stock positions at a lower price. This act increases the profit margin. While stock markets provide a 50/50 chance, options enable one to start at a 70 percent chance and choose when to start and stop. This act provides a less risky environment and increases the chances of higher returns. …
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