CHAPTER 5
An Introduction to Volatility-Selling Strategies
Along with death and taxes, there is one other fact of life we can all count on: the time value of all options ultimately going to zero. What an alluring concept! In a business where expected profits can be thwarted by an unexpected turn of events, this is one certainty traders can count on. Like all certainties in the financial world, there is a way to profit from this fact, but it’s not as easy as it sounds. Alas, the potential for profit only exists when there is risk of loss.
In order to profit from eroding option premiums, traders must implement option-selling strategies, also known as volatility-selling strategies. These strategies have their own set of inherent risks. Selling volatility ...
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