Explore Your Options by Tom Gentile
How do I figure out which strategies
are best to implement when the volatility
of the market changes so drastically
from one season to the next?
Fortunately for option traders, volatility
is your friend, provided you understand
just what strategies to use.
Though the duration of each trend can be
difficult to predict, periods of high or low
volatility can be assessed by looking at a
chart of the VIX (the volatility index from
the Chicago Board Options Exchange) at
any given time on most charting programs.
The VIX has traded in an average
range between 20 and 35 since 1997.
Prior to that, the range was much lower,
characteristic of the economic conditions
of the underlying markets. (The VIX will
have undergone changes after this column
goes to press that better reflect market
sentiment. The true range of 20–35
may vary slightly relative to the new
formulas used to calculate the VIX.)