strategies for buying expensive options?

Discussion in 'Options' started by stevenpaul, Aug 29, 2010.

  1. Say folks, what is your preferred strategy for buying volatility where IV is already at the high end of its range? I know some guys favor backspreads, while others just go with long straddles to capitalize off an expected big move (assuming IV is predictive), inflated premiums notwithstanding. Any ideas? I'm all ears, or in this case, eyes.

  2. sugar


    Otm put calendars.
  3. Carl K

    Carl K

    Question: Why do you want to buy anything at or near its high ?
    Long straddles, you're buying twice as many high priced options.
    Spread trading allows you to write off at least some of your cost.
    Check to see if back months are also at or near highs.
    ATM - Calendars, straddles, short butterflies are subject to IV crush.

    Enjoy life, it's limited.
    You only get as much as you take.
  4. spindr0


    My two cents is that positions that sell high volatility are a good way to cope with paying thru the nose for inflated IV. For example with earnings announcements, buying 2nd month lower IV to hedge selling near month high IV.

    It really boils down to your ability. If you're one of the few who gets timing and selection down, you can do just about anything that you please. If you're like most of us plebians, you gotta be conservative.
  5. spindr0


  6. (assuming IV is predictive),
    you should have already got the perfect answer!


  7. $$$$$ - Buy Higher Sell even Higher - $$$$$$$$$$$$
  8. Carl K

    Carl K

    Just say no to sheep.