Strategies for High Volatility

Discussion in 'Options' started by maninjapan, Dec 4, 2008.

  1. Im interested in what kind of strategies a Seller would be using in these kind of volatile markets. Im guessing things like Iron Condors are out, but with premiums as high as they are sure ly there must be something that they are all into???
  2. MTE


    "they are all into"? All who?

    I don't know what makes you say that iron condors are out. Iron condors work well if you know how to trade them.
  3. Well, 'they' being option sellers. I would have thought that condors would be quite risky with the current market volatililty. (obviously all strategies have risk involved...)
  4. cvds16


    with these kind of vols and if I am not trading delta-neutral, I want to be net seller of premiums.
  5. cvds, right. Thats what I would have thought. The premiums must be very attractive to sellers. What kind of general strategies though can take advantage of this kind of volatility without exposure to insane amounts of risk?
  6. 1) Iron condors with insurance (owning extra calls and puts).

    2) Trading smaller size is a good way to be in the game, but with reduced risk.

  7. MTE


    A condor is a perfect strategy, short premium and limit risk. All you have to do is adjust the position size so that you don't get wiped out by a few bad trades.
  8. Net seller of premium is good. Problem with IC's is that the volatility is to the upside now. High volatility can cause wide swings to the upside as well as the downside--as we have seen. Unless you are legging into your OTM bull put spreads and OTM bear call spreads (fading the highs and lows), I don't see where the profitability is. If your bodies/wings are so far OTM, then where is the profit vs risk? How about fading the downside with bull put spreads only?