Making Volatility Your Friend

When trading options, volatility either really helps you, or really hurts you. One way to take out the major uncertainty volatility brings, is to trade the volatility itself. $VIX is an index of volatility of the market and generally sits between $21-27. If the market is not very volatile it sits at or slightly below $21 and in times of general volatility it hovers around $27. When there is major volatility it is sometimes over this level of 27, but usually returns very quickly. The best way to trade it in my opinion is to get calls once it drops below $21. Sometimes it’ll stay low for two days but it will eventually rise over. For small account traders this can be a very easy way to make small gains, however it does require plenty of patience.

-Darnel Shillingford

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