Options Trading Strategies for Low Volatility Markets

If you’re looking for an option trading strategy to trade in a low volatility market, the following article suggests and explains a few you may want to consider. Make sure you understand the risk of each before you try one on your own that you’re not familiar with. You can always test them out by paper trading.

Market is in very narrow range. April is generally low volatility month. In such scenario Long Option Traders tend to loose money day by day. Here we present some option strategies for this type of lack luster market.

Low volatility options trading strategies you can use:

Short Puts and Calls – This is the main strategy we use here and by far the most profitable. It’s cheap and you don’t have to enter multiple options making it an easy trade for beginners. With short options you can move your strike price far from the current market forcing the market to make dramatic moves in short time period. You also have positive time decay since you collect the premium up-front and let the option expire worthless at expiration.

Short Strangle – A combination of short Puts and short Calls. Again a great risk reward type trade because you collect an up-front premium and let the options expire worthless in a flat market.

Butterfly Spread – Very complicated and complex option trade. No recommended for beginners! This is a great strategy with limited risk but you have to be dead on in your analysis of where the stock will close at expiration. Sure the risk is capped but if your not right at expiration there’s a 100% chance you will lose money.

See Option Call Put Tips for the rest of the article


Option Trading Secrets