Relative Volatility and Options Strategy

If relative volatility has a low rank, say 8 (out of 10), then analysts usually recommend that a trader would be generally better off buying premiums as opposed to selling them. On the other hand an option with a high ranking relative volatility is usually advised to sell (or write) options instead of buying them.

Over time those strategies that allow a trader to avoid unfavorable scenarios and focus on high probability positions will induce profit making cases.

Tip: Variations in volatility have a greater effect on longer termed options than on short ones.


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