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V. 21:11 (90): Explore Your Options by Tom Gentile
V. 21:11 (90): Explore Your Options by Tom Gentile
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Explore Your Options by Tom Gentile
VOLATILITY
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 2035 may vary slightly relative to the new formulas used to calculate the VIX.)
VOLATILITY
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 2035 may vary slightly relative to the new formulas used to calculate the VIX.)
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