Explore Your Options by Jay Kaeppel
PLAYING MARKET VOLATILITY WITH RATIO BACKSPREADS
I keep hearing that there are ways to take advantage of low (and/or high) volatility via the use of options. Can you give me an example?
Absolutely. Extremes in volatility can offer option traders many opportunities that aren’t available to stock traders. Let’s look at one example. The iShares Silver Trust (SLV) is an ETF designed to track the price of silver bullion. As of the date in question (see Figure 1), there are a few key factors ...