For covered call writers and sellers of cash-secured puts, rising volatility has two faces. It is our friend in that our premiums will be higher as they are directly related to the implied volatility of the underlying securities. It is our enemy as we will be subjected to greater downside risk. So, which is it… […]
Using the CBOE Volatility Index (VIX) for Our Strike Price Selection
Options trading basics teaches us that the VIX or CBOE Volatility Index reflects the market’s expectation of the upcoming 30-day volatility. It measures market risk and is also known as the investor fear gauge. With this in mind, covered call writers are faced with a dilemma. Increased market volatility will translate into higher option premiums […]
VIX Covered Call Writing: Selling Options Against Market Volatility
Traditional covered call writing involves first buying a stock (or exchange-traded fund) and then selling a corresponding call option. The result of the initial trade is to generate cash flow from the option sale and lower our cost basis on the stock side. Based on member feedback, there has been a growing interest in writing […]
Market Volatility and VIX-Based Exchange-Traded Notes
Our covered call writing and put-selling portfolios have been significantly impacted the past few weeks from extreme market volatility. In addition to rising wages, inflation concerns and projected interest rate hikes, volatility based exchange-traded notes are also playing a role in the market decline. What is the VIX? The VIX is also known as […]
VIX Volatility Options: A Place In Our Covered Call Writing Portfolio?
Option returns play a major role in our covered call writing and put-selling strategies. Mega-returns can be quite enticing but also very dangerous. Recently, with market volatility rising exponentially in response to global-economic concerns, a few of our members have inquired about using volatility options ($VIX) based on the S&P 500 volatility as a means […]
Implied Volatility: General Market Conditions That Make Option Values Move Up Or Down
Option trading basics teaches us that selling call and put options is actually selling time value. Time value consists mainly of time to expiration stats and the implied volatility (IV) of the underlying security. Since most of us are selling monthly options, the main distinguishing factor in our option prices is the implied volatility…we are […]
Combining Technical Analysis And Market Assessment To Determine Strike Selection
Mastering stock and strike price selection are key components in successful covered call writing. There is no one factor that will dictate our choices but rather a mosaic of bits of information which will lead us to the best selections. In this article, I will discuss two of those critical components: technical analysis of the […]
The Role Of VIX and Market Volatility In Our Covered Call Writing Decisions
Options trading basics teaches us that the VIX or CBOE Volatility Index demonstrates the market’s expectation of 30-day volatility. It measures market risk and is also known as the investor fear gauge. With this in mind, covered call writers are faced with a dilemma. Increased market volatility will translate into higher option premiums because the […]
Covered Call Writing and The CBOE’s Volatility Index (VIX)
Stock options strategies, including covered call writing, factor in a multitude of parameters including fundamental and technical analysis as well as many common sense principles. In my books, DVDs and seminars I discuss determining market tone before making any investment decisions. One of the main factors I utilize in this determination is the VIX. The VIX […]
The CBOEs Volatility Index (VIX)
In my books and seminars I discuss determining market tone before making any investment decisions. One of the main factors I utilize in this evaluation is the VIX. The VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which is a measure of the implied or expected volatility of S&P 500 options […]
