Taming The Volatility Beast by Kevin Lund
Take advantage of volatility and play those options.
If you’ve traded options for any length of
time, you’ve probably experienced the
following scenario: You spot a stock that
seems to have some good swings. After
watching it drop for a few days, your
technical analysis suggests the selling was
simply profit-taking, and you feel the stock will move up
soon. So you buy some call options. Over the next couple of
days, however, as you watch your stock climb modestly, the
value of your options drops, probably because you purchased
This kind of situation is common, and is one of the reasons
many traders and investors shy away from the options market.
But there are also many who trade options every day with
great success because of their ability to harness volatility.
Volatility is perhaps the most misunderstood component of
options trading, which is why many who blindly dive into the
options market do so with limited success when they start out.