Volatility

If a particular market offers options upon it, volatility trading strategy is another manner in which a view of the market can be expressed. As such, the investor is not taking a view of the direction of the market, but its momentum. The greater the volatility of a market the higher the premium will be, as the probability of any option expiring profitably is greater. In essence it is increased uncertainty in a climate of volatile movement that causes options to be valued at a higher premium.

Volatility Trading Strategy Ideal

In order to eliminate the directional risk of the …