This article was originally published in The Option Strategist Newsletter Volume 9, No. 3 on February 10, 2000.
We have often spoken about how to calculate or interpret implied volatility, and how to relate it to historic volatility. Some of these discussions have bordered on the theoretical, while others have been quite practical. However, we haven’t really addressed how implied volatility affects a specific option strategy.
This article was originally published in The Option Strategist Newsletter Volume 5, No. 18 on September 19, 1996.
The volatility that has been introduced into the overall market since February has made most options expensive, or seemingly expensive. This comes after one of the most prolonged periods of depressed volatility that we have seen since options started trading: from 1991 through 1995 options were consistently on the cheap side, except for a few brief periods. Consequently, the current crop of option prices seems very expensive — especially considering what traders had become accustomed to over the past few years. In reality, it is more likely that they are just priced at higher absolute levels than one is accustomed to seeing. In this article, we want to address some strategies and tactics for handling "expensive" options.
This article was originally published in The Option Strategist Newsletter Volume 9, No. 05 on March 9, 2000.
Two issues ago, we wrote about the effects of changes in implied volatility on a call bull spread. Several readers asked about similar effects on other “common” positions – especially on put spreads – so we’ll expand on that theme this week
This article was originally published in The Option Strategist Newsletter Volume 3, No. 23 on December 8, 1994.
Traders sometimes use bull spreads instead of actually buying calls when they want to hedge their bets somewhat. In this article, we'll take a look at how the bull spread works, and perhaps shed some light on the somewhat unusual characteristics of its profit potential as time passes.
