The Rule Of 16 – Deriving Daily Meaning From An Annual Volatility Metric

When trading options, having a clear way to interpret implied volatility and apply it to daily price movement can provide critical insights. To help you better understand this important connection, Interactive Brokers will host a live webinar on May 27th focused on The Rule of 16 – a straightforward method for translating annual volatility into daily expectations.

Led by OIC instructor and former options trader Mat Cashman, this session will break down the Rule of 16, a simple and effective way to calculate daily standard deviation, giving you a framework to better understand market movement and risk.

Investors will learn about:

What the Rule of 16 is and why it matters
How to convert annual implied volatility into daily price expectations
Breaking down annual variance into manageable timeframes
How daily standard deviation helps contextualize stock moves
Real-world examples of outsized moves and what they mean
How changing implied volatility impacts future expectations

This Webinar involves Options Trading

Multiple leg strategies, including spreads, will incur multiple transaction costs.
To register you must read Characteristics and Risks of Standardized Options and click the button below.

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Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from OCC and is being posted with its permission. The views expressed in this material are solely those of the author and/or OCC and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Options (with multiple legs)

Options involve risk and are not suitable for all investors. For information on the uses and risks of options read the "Characteristics and Risks of Standardized Options" also known as the options disclosure document (ODD). Multiple leg strategies, including spreads, will incur multiple transaction costs.