As an options trader you will need to learn how to judge price movements or volatility for the underlying stock. With stock options, the trader should consider the exchange on which the stock trades. The volatility of a stock and the volatility of the options on that stock are very much influenced by the volatile state of the overall exchange.

Often times, calm markets calm down volatile stocks. However, an individual stock can often be very volatile in the calmest of markets. There are can be many reasons why this may be the case, but these can be sometimes a good candidate for a short term option trade.

Sometimes volatility can affect lots of traders negatively. Often times this there can be volatility that strikes down very harsh on a lot of traders very suddenly. Other times it can involve volatility (whether it is higher or lower) which is negative for traders that can build up very gradually and incrementally until it soon begins to sweep up more and more traders in its sights.

Volatility is a very important factor for many market analytic tools for helping to predict fair market value of options. It also plays a big role in the key indices you study to get a fix on market trends.

As an options trader it is important that you are aware of the 2 basic types of stock exchanges in order to get a good comprehension and understanding of their impact on the volatility of the underlying asset you trade.

The first and oldest type of exchange involves having a physical trading floor where buyers and sellers meet via their representative brokerage firms.

Many people think of this as being an auction where people call out a bid and ask for offers on the floor of the exchange. This metaphor will help you to understand somewhat how prices are set.

Some examples of these types of exchanges are Chicago Board of Options Exchange (CBOE),  Pacific Stock Exchange (PSE), Midwest Stock Exchange (MWSE), Philadelphia Stock Exchange (PHLX), New York Stock Exchange (NYSE), and American Stock Exchange (AMEX)

The second basic type of stock exchange is the electronic or screen-based, as in computer monitor, exchanges.

The type of exchange the underlying stock trades on goes back to volatility and which type of exchange has a propensity to be more or less volatile. This type of information that can affect volatility can be very important for an option trader to know.