Traders relying on implied volatility (IV) to time trades are relying on a deeply flawed calculation. The debate over whether to use implied or historical volatility is pointless. The one (historical volatility, or HV) is based on actual stock prices in the recent past. The other (IV) is an estimate of future option volatility based… [READ MORE]

Options traders tend to think about return almost exclusively, to the exclusion of other risk attributes within their control – cost, time, exposure, and personal bias. Return, however, is poorly understood even among seasoned traders. In setting goals for your options trades, how much return do you expect? How much do you need? Options solve… [READ MORE]

The ratio write is an expansion of the covered call. At first glance, it does not seem that there is much difference between the two positions. There is considerable difference, however. The covered clal is based on a match between 100 shares of stock and one call. The ratio expands this. For example, in a… [READ MORE]