tastylive (tastytrade)

Most Traders Use Moving Averages on Their Charts. Tom Preston Adds This Instead.

The video introduces implied volatility (IV) charts as a complementary tool to traditional technical studies, showing how option‑market expectations can be visualized directly on price charts. Tom Preston demonstrates adding the IV indicator for IBM, Tesla, and the IWM ETF, explaining that the metric reflects the aggregate volatility of a stock’s options rather than a single contract. Key observations include IBM’s IV spiking ahead of its earnings release and then collapsing once results were disclosed, while Tesla’s IV stayed elevated even as the stock rallied, suggesting lingering uncertainty. For IWM, the IV rose as the ETF fell and fell during a rally, illustrating the classic inverse relationship between equity price and volatility. Preston highlights specific chart moments—such as the diamond marker for earnings dates—and notes how the IV chart provides context that IV rank alone cannot, by pinpointing when high or low volatility periods occurred historically. He advises traders to align strategy selection with current IV levels: low IV may favor debit spreads, high IV may suit premium‑selling structures like iron condors. Overall, the IV chart offers a price‑independent lens on market sentiment, helping option traders time entries, choose appropriate spreads, and manage risk based on the underlying volatility environment.