Is higher implied volatility good or bad?
On One Hand: Higher Volatility, Weaker MarketImplied volatility is the estimated volatility for a security. Hans Wagner, creator of Online Trading Markets, says the higher the implied volatility, the more likely the stock market will decline. Volatility is basically an indicator. Increased volatility worries investors because stock prices fluctuate. Bull markets, or rallying markets, have low volatility. Crestmont Research indicates that when volatility is low, investors can expect a 12 percent annual return. On the other hand, higher volatility leads to a 4.1 percent loss annually.On the Other: Risk Equals ReturnBrian Bloch acknowledges that volatility can be detrimental to an investor’s portfolio, but explains that the investor must understand this volatility. An investor must be certain to know if high volatility fits within your investment scheme. Bonds are a safer alternative to stocks, but because of the low risk, there is low return. It is important to understand that volatility
