This segment is about taking advantage of low volatility environments in order to stay active and engaged in the markets which enables a trader to take advantage of higher volatility opportunities once they appear again. Every trader can benefit from the information here.
We love to sell premium and to take advantage of high volatility. There are period though when volatility is low and thus selling premium is not a good idea. We then have to consider buying premium to stay active in the markets and to remain alert for better opportunities.
We look for three things when we buy volatility. The first is a low implied volatility (IV) That can be a bit subjective. The second is a low IV Rank. We look for a figure below 35 for IVR. Finally, we look for a flat skew in IV from the front month to the back months. The guys explain why.
A table of AAPL's volatility characteristics was displayed as an example. The table include front month IV, back month IV, IVR and IV. A graph was displayed of AAPL’s implied volatility (IV) versus implied volatility rank (IVR) from August 24th to present.
A discussion about the different strategies that could be used and why followed. More than a dozen different strategies were discussed. Additionally, the use of volatility products was discussed. Examples were given for many of the strategies and the volatility products.
Watch this segment of “Best Practices” with Tom Sosnoff and Tony Battista for information on how and when to trade in low volatility environments and still keep active.
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