Option Trading Strategies: Playing Options Volatility
One of the most apparent attributes of options is their volatility. And one of the ways we can use this volatility is to generate option trading strategies. Mozy Online Backup: 2GB
Free. Automatic. Secure. What do we mean by volatility? In layman’s terms it is the relative rate at which the price of the option moves. How far up and down does an options price go in a given time period. If it moves a lot, it has high volatility, if it moves less, it has lower volatility. The volatility of a given option will change with respect to events or circumstances that affect the underlying instrument. Examples of such events are surprises in earnings, specific information about a company, or major world geopolitical news. Options are almost always more volatile than their underlying stock, ETF or futures. Why should we care? Times of high volatility coincide with relatively high option prices and are often good times to sell options. Recognizing high volatility can help us time the use of safe-options-selling techniques when option prices are high, thus enabling us to pocket higher premiums. Options volatility is subdivided into two types: historical volatility and implied volatility. Each of these requires some explanation. Once you grasp these volatility types, you can use then to your advantage time safe-option sales. So lets take a look at options volatility:
Historical Volatility
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