Options Volatility Trading

Let’s put our knowledge about volatility to good practical use by developing a simple options volatility trading method. It all boils down to this: When volatility is high for a given asset, premiums for options on that asset will be high. Conversely, when volatility is low for any given asset, the premium for options will be correspondingly lower.



Therefore we can construct a basic rule of thumb: Sell covered calls, cash-secured puts, credit spreads and other advanced option sells when Implied Volatility is high. You will receive more premium at these times.

Pay attention to options volatility. Monitor it for the market in general and for your favorite holdings. Let it be a guide for you to help time your safe option selling trades. As the volatility subsides, options prices will decline, putting you in a profitable position and giving you the opportunity to close out your trade by buying the option back at a lower price or by protecting your developing profits with a trailing stop.

There are several very good books available that treat options volatility and how to harness it in your options trading.

Option Volatility & Pricing: Advanced Trading Strategies and Techniques

Option Volatility Trading Strategies, New and Updated Edition

Buying and Selling Volatility

Return from Options Volatility Trading to Options Volatility

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