Things are whippy out there. And volatility is elevated to levels we haven’t seen in quite a while. This is no time to be a hero. This is the time to focus on edges and putting them to your advantage.
I know it’s sexy to be a buyer of calls if you want to be the hero bottom caller. Similarly, it’s equally sexy to be a holder of long puts into a market crash. But this is not the time to be initiating new long calls or puts positions. The premiums you’d pay are so high right now that you could totally nail the direction, but you’d be swimming upstream against an eventual mean-version in volatility pricing.
But this does not mean we pick up our ball and go home. We options traders have options!
In this environment, we’re looking for plays where we are net sellers of premium. With premiums this juicy, it would be irresponsible to do anything else. [Read more…]