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+Chapter 36: The Basics of Volatility Trading 739 
+Note that Figure 36-4 indeed confirms the fact that $OEX options are consis­
+tently overpriced. Very few charts are as one-dimensional as the $OEX chart, where 
+the options were so consistently overpriced. Most stocks find the difference line 
+oscillating back and forth about the zero mark. Consider Figures 36-5 and 36-6. 
+Figure 36-5 shows a chart similar to Figure 36-4, comparing actual and implied 
+volatility, and their difference, for a particular stock. Figure 36-6 shows the price 
+graph of that same stock, overlaid on implied volatility, during the period up to and 
+including the heavy shading. 
+The volatility comparison chart (Figure 36-5) shows several shaded areas, dur­
+ing which the stock was more volatile than the options had predicted. Owners of 
+options profited during these times, provided they had a more or less neutral outlook 
+on the stock. Figure 36-6 shows the stock's performance up to and including the 
+March-April 1999 period - the largest shaded area on the chart. Note that implied 
+volatility was quite low before the stock made the strong move from 10 to 30 in little 
+more than a month. These graphs are taken from actual data and demonstrate just 
+how badly out of line implied volatility can be. In February and early March 1999, 
+implied volatility was at or near the lowest levels on these charts. Yet, by the end of 
+March, a major price explosion had begun in the stock, one that tripled its value in 
+just over a month. Clearly, implied volatility was a poor predictor of forthcoming 
+actual volatility in this case. 
+What about later in the year? In Figure 36-5, one can observe that implied and 
+actual volatility oscillated back and forth quite a few times during the rest of 1999. It 
+might appear that these oscillations are small and that implied volatility was actually 
+doing a pretty good job of predicting actual volatility, at least until the final spike in 
+December 1999. However, looking at the scale on the left-hand side of Figure 36-5, 
+one can see that implied volatility was trying to remain in the 50% to 60% range, but 
+actual volatility kept bolting higher rather frequently. 
+One more example will be presented. Figures 36-7 and 36-8 depict another 
+stock and its volatilities. On the left half of each graph, implied volatility was quite 
+high. It was higher than actual volatility turned out to be, so the difference line in 
+Figure 36-7 remains above the zero line for several months. Then, for some reason, 
+the option market decided to make an adjustment, and implied volatility began to 
+drop. Its lowest daily point is marked with a circle in Figure 36-8, and the same point 
+in time is marked with a similar circle in Figure 36-7. At that time, options traders 
+were "saying" that they expected the stock to be very tame over the ensuing weeks. 
+Instead, the stock made two quick moves, one from 15 down to 11, and then anoth­
+er back up to 17. That movement jerked actual volatility higher, but implied volatili­
+ty remained rather low. After a period of trading between 13 and 15, during which 
+time implied volatility remained low, the stock finally exploded to the upside, as evi­
+denced by the spikes on the right-hand side of both Figures 36-7 and 36-8. Thus,