Two traders both decide options are cheap, both buy a straddle, and both are right about volatility, yet one loses and the other gains. This lesson shows how to tell level from timing, read the skew, and set an exit in volatility.
After this lesson you can
- Tell a wrong level from wrong timing in a volatility trade
- Choose an expiration that gives a volatility view time to play out
- Judge the skew against its own usual steepness before trading it
- Compare the market's odds with a stock's own record before selling volatility
- Choose between selling the steep side and buying the cheap side, set an exit in volatility, and avoid the five mistakes
Chapters
- 0:00Right about volatility, still losing
- 1:20Level, or timing
- 2:27Giving the view time
- 3:43When the skew is a signal
- 4:45Selling the steep side
- 5:57The price of that protection
- 7:03Buying the cheap side
- 8:26Choosing strikes to sell
- 9:46Getting out
- 10:58Five mistakes
- 11:44The whole lesson on one screen