Explore Your Options by Jay Kaeppel
MITIGATING VOLATILITY RISK WITH OPTIONS
I typically just buy calls and puts—that is, long premium. The stock market fell hard and I think it will bounce, but implied option volatility has gone through the roof. Is it a good idea to buy calls in this situation? Or are there alternatives?
There are a few key considerations to account for in this situation. First, take a close look at Figure 1, which displays price action for ticker SPY along with the implied volatility for 7- to 30-day options ...