As the title suggests, options strategies are infinitely easier with volatility reaching these extreme levels. That doesn’t mean we should throw caution to the wind and trade every strategy known to man. It does however offer an opportunity to make some quick cash and in this market that could be much needed.
Let’s start by answering the most obvious question. Why are options strategies easier now? Simple… Volatility is a measure of movement in the market. Generally, when markets move they sort of casually move higher or lower. When volatility expands, as it is now, markets don’t just move casually, they scream to higher or lower prices. Mostly lower but that’s beside the point. To most this is a dangerous time to enter the market but to an options trader this is our time.
Considering Options Strategies
- Buy a Long Put. For a detailed review check out my fundamental page or my long put strategy page. Not quite enough information, check out the option playbook description of a Long Put strategy.
- Sell a Call Spread. For a detailed review check out my Bearish Call Spread strategy page. Not quite enough information, check out the option playbook description of a short call strategy.
- Buy a Long Call. For a detailed review check out my fundamental page or my long call strategy page. Not quite enough information, check out the option playbook description of a long call strategy.
Reviewing Options Strategies
- Buying a long put makes the most immediate sense given the state of emergency we find ourselves in. This makes sense because seemingly everything is being shutdown. To date, the NCAA has cancelled all events, the NBA is playing games without fans, MLB has cancelled events, businesses globally are shutting down or limiting operations, and the list goes on and on. In a nutshell, this could cripple the global economy, at least temporarily. For the trader that shares this sentiment the Long put is the ideal strategy. As the market tanks, profits will soar.
- Selling a call spread could also make sense given the current situation. The greatest difference is the limited reward. This would be the more appropriate trade should you believe the market will even out at these lower levels. Should that actually happen volatility will begin to subside and contribute nicely to the strategies profitability.
- Buying a long call could be the play of the century. I only say this because we really our in unknown territory. From the outside looking in, the world is scarier than its ever been but if we look a little deeper this could be just another Y2K experience. The world goes crazy and the market implodes. Shortly thereafter, we see a steady rise in price that could reward the patient trader handsomely. Therefore, should you believe the sky isn’t actually falling and our economy is still intact, opting for the longer term call option rather than playing for quick money may just put a big bag of cash right in your account.
Of course, this list isn’t exhaustive and any number of strategies could be employed in this market to realize a profit. For the sake of simplicity and to avoid unnecessary complications I would think these will suffice. That however, I’ll leave in your capable hands.
May God bless and keep you,