Tuesday, 3 April 2012

Low Volatility Option Strategy


Low Volatility Options Strategies

Market is in very narrow range. April is generally low volatility month. In such scenario Long Option Traders tend to loose money day by day. Here we present some option strategies for this type of lack luster market.

Low volatility options trading strategies you can use:

Short Puts and Calls – This is the main strategy we use here and by far the most profitable. It’s cheap and you don’t have to enter multiple options making it an easy trade for beginners. With short options you can move your strike price far from the current market forcing the market to make dramatic moves in short time period. You also have positive time decay since you collect the premium up-front and let the option expire worthless at expiration.




   Short Strangle – A combination of short Puts and short Calls. Again a great risk reward type trade because you collect an up-front premium and let the options expire worthless in a flat market.

Long Butterfly Spread – Very complicated and complex option trade. No recommended for beginners! This is a great strategy with limited risk but you have to be dead on in your analysis of where the stock will close at expiration. Sure the risk is capped but if your not right at expiration there’s a 100% chance you will lose money.


8 comments:

  1. i like your blog on options,interesting and easy way to explain option trading tips

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  2. low volatility index is the key for the market,this post makes clear view of Volatility index in readers mind.

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  3. Thanks for the tips you provided friend. i have taken positions on your tips in option call put. The tips were too gud and helped me improve my profits.

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  4. Thanks RAJA glad to know it helped you improve your trading in OPTION. Good luck for OPTION trading and hope to see you here again

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  5. nice blog, it contains full theoritical as well as practical calls

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  6. Great Post, I love the way you have describe the things related to option

    ReplyDelete