How to see if the option is trading at a cheaper price compared to its historical prices? I could see IV in options chain but I think a number ‘25’ could be cheaper for one stock but costly for another.
It would be great if you can point me to a screener/scanner that helps me filter those stocks or way to calculate it myself using Excel?
IV varies for each and every contract so it is suggested to consider IV for particular futures contract.
IV can not be compared with historical volatility and it should be compared with itself. Consider historical ranges of IV,for example for Nifty IV of 28 and above is considered very high and 12 to 15 is very low.Its average range is between 16 to 22.
So for example if IV is 30 as it is mush higher than avg, options on nifty are considered as relatively expensive.If IV is around 15 then options are considered as trading cheaply.
Based on IV range one should employ strategies using options.Ideally it is suggested to implement strategy which involves of buying of options when IV is in lower range and implement strategy by selling options when IV is at higher range.
One can input parameters here and get IV values.