When Do Market Makers Panic? โ Implied Volatility Index ๐ฏ
While retail traders obsess over price, professionals and market makers focus on expectations.
So how do you know if the โhouseโ is calmโฆ or shaking with fear?
๐ Watch Implied Volatility (IV).
๐ธ Implied Volatility vs Historical Volatility
Historical Volatility = looks at the past
Implied Volatility = looks into the future
IV is reverse-engineered from options prices. It tells you what the market expects, not what already happened.
๐ High Implied Volatility
Options premiums become very expensive
Pros expect a big move is coming
Traders rush to buy protection or place aggressive bets
Fear & high expectations dominate
๐ Low Implied Volatility
Options are dirt cheap
Market is in complacency mode
No one expects anything major
The lake looks calmโฆ too calm
๐ธ How Smart Money Uses IV (Opposite of Retail):
๐ง IV at Record Lows = Calm before the storm
Smart money quietly builds positions
Long or short doesnโt matter โ cheap optionality is the key
When IV expands, even a small price move = outsized gains
๐ฅ IV at Extremes / Peaks
Retail panic-buys options
Premiums are insane
Smart money SELLS options, harvesting fear
They get paid while others overpay
๐ Never buy options when IV is sky-high.
Thatโs like buying fire insurance after the house is already burning.
๐น Final Warning
Donโt see sideways candles and assume the market is boring.
Open the Implied Volatility chart.
If price is ranging but IV starts spiking verticallyโฆ
โ ๏ธ Fasten your seatbelt.
The rollercoaster is loading.
The move will be violent.
