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Volatility is at Record Lows... How to Trade It!

Discussion in 'General Discussion' started by tom, May 27, 2014.

  1. tom

    tom Administrator Staff Member

    There was a good article published at Zero Hedge today:

    http://www.zerohedge.com/contributed/2014-05-23/trading-floor-insights-brad-thomas

    Part of the article says:

    "Now one can easily simply buy straddles in all of these markets. I expect you’ll only need one or two of them to surprise volatility sellers, resulting in you getting that new Porsche 911 you’ve been looking at. By buying straddles you don’t have to care which way the market moves, as long as it moves and complacency disappears or even subsides sending volatility higher.

    Right now Chris and I have been discussing a 4.5 year long dated option, which I’ve recently recommended. The particular stock needs to move by 9%! 9 freaking percentage points! Just yesterday it moved 1% in a day! We have 4.5 years to break-even. Opportunities like this don’t roll around every day but right now we have a plethora of them and I’m feasting."

    Is anyone looking at longer term straddles or strangles?
     
  2. Eng Huat NGO

    Eng Huat NGO New Member

    Hi Tom,
    Good to see you in action again ;)
    For long term straddles, are you looking at high beta stocks? I guess the fundamental is not that important as long as it moves alot.

    Thanks
    EH
     
  3. tom

    tom Administrator Staff Member

    Nice to see you too again!! It's a small world :)
    I don't know what stocks the authors of that article are trading, but I agree that high beta stocks would be important. Time to hit http://finviz.com :)
     
  4. Bobby

    Bobby New Member

    I find that even with low volatility gamma scalping or trading a long neutral positions is difficult as the underlying seem to have an even lower actual vol.

    I do feel like Silver LEAPs are dirt cheap. 583 Day leap options $1 OTM are just 1.80... that could happen in a week or two....?! The 25/30 call spread is only 0.25. That seems to be a decent trade if you think silver is decently cheap as I do....

    Bobby B
     

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