Options for Playing Volatility

Featuring Michael Purves

Michael Purves, chief global strategist and head of derivatives strategy at Weeden & Co., lays out his plan to profit from rising volatility. He explains why he sees the VIX rising and reveals the key levels to watch, in this interview with Justine Underhill. Filmed on June 14, 2018

Published on
20 June, 2018
Duration
12 minutes
Rating
11

Comments

  • MT

    Mike T.

    23 6 2018 20:50

    0       0

    typo, in previous comments, I should have said for an existing position in July 20th Monthly Cycle.............

  • MT

    Mike T.

    23 6 2018 20:47

    4       0

    If tempted to follow this trade recommendation before jumping in ask yourself at a minimum the following questions and if the answer to any one is 'don't know' then stay away. 1./ do you understand the optimum time in a cycle to roll to next month to avoid Gamma risk? (Tip: for an existing position in July 25th Monthly, the statistically optimum day to Roll out to August 17 Monthly cycle, is this Friday June 29th, 21 days before expiry ) 2./ Do you know the mechanics of how to Roll Out in time? 3./ do you know how to set the probabilities of success in your favor by setting statistically realistic profit targets? Anyone now thinking what does any of this all mean is not ready to enter the trade. If tempted to still try it i.e. put on the position and let it run to expiry ( which you had to do because you didn't now how to roll) to just see what happens, then best wishes and good luck.

    Now options are THE single most profitable way to trade and invest, premium selling strategies in particular are immensely powerful. However it takes time to learn, so for any one interested to understand more my recommendation is start by deciding that over the next three months you will complete an initial program of learning, importantly do at least do something every day, study methodically with purpose. At the end of the three months, you'll NOT be ready to call yourself an option trader but you MIGHT be ready to trade very small positions with seed money as part of your education but at a minimum you'll certainly be in a much better place with some new found clarity to appreciate the potential of multiple option strategies and hopefully now motivated to continue and go on further with the learning process. Once competent the prize at the end of road? It's entirely possible for most folks of any age to trade options profitably without the news, without expert opinions, and when armed with some basic skills be able to identify the best options trades with the highest probability of success and yet be completely agnostic on the underlying Company, Index or ETF.

    • LS

      Lubomir S.

      24 6 2018 10:36

      0       0

      Many thanks Mike. Q: do you meat statistical analysis rather than the trade geeks?

    • LS

      Lubomir S.

      24 6 2018 10:36

      0       0

      Sorry - do you mean etc.

  • RD

    Ryan D.

    20 6 2018 18:52

    1       0

    Like this one. Solid logic.
    Looks like the cost on the July 18th's for this trade is more around .20. You can go out 90 days and do it for around .50.

  • BL

    Bart L.

    20 6 2018 10:21

    0       0

    I think Michael misspoke near the end of the segment when he said sell the $20 July call. He should have said Buy the $20 call to take advantage of a possible spike in the Vix.

    Not convinced about the timing, but at 10 cent net cost may work even if you roll for the next six months.

    • AR

      Alex R.

      20 6 2018 13:19

      8       0

      Hi Bart, I don't think he misspoke -- he's advocating selling that 20-call as part of his call spread. The trade has three legs: short 12-strike put, buy 15-strike call, sell 20-strike call.

    • BL

      Bart L.

      20 6 2018 22:08

      1       0

      Thanks Alex I had another listen and I guess I misheard your absolutely right three legs to the trade, cheers for clearing that up for me.

    • NM

      Nick M.

      21 6 2018 04:19

      0       0

      No he misspoke, he said sell the July 20 'Put'

    • EQ

      Eduardo Q.

      27 6 2018 13:10

      1       0

      Hey Nick. As Alex said. The Trade has 3 legs. He´s buying the 15-20 Call Spread (Long Call 15 - Short Call 20)... and Selling the 12 Put. Last one to reduce even more the premium paid for the call and in case it is exercised, he´s so confident that VIX will move to the upside that this would increase his position size and improve his entry price to the upside...