A year ago, the VIX was at 43. Today it is in the high teens with a strong downtrend pulling it even lower. 

This sent me back to the bookshelves to look through options strategies that leverage an up trending market in low volatility. Ideally, we leverage the muted moved of the market and take advantage of lower premiums. This allows us to either take smaller positions or grab bigger gains when the stock moves or both. 

There is a key element to trading lower volatility to keep in mind. 

With the VIX this low it means the moves we are looking for will be less frequent. A big element in making sure we are in the right postion to grab the win is time. 

A couple ways to do this is to use time decay to your advantage. There are debit strategies that allow time decay to be a benefit. 

The other way to use time is just as important.  

Consider extending the timeframe of your position with LEAPS. The premium may seem higher, but it you factor in the cost of rolling a shorter term option in and also the benefit of additional time for your position to become profitable, it can be well worth it.

If you want to get more on how to exploit these conditions and cook up some good trades, grab Don Fishback’s “Your Quick-Start Guide to Options Success“. This  quick read does an excellent job of matching options strategies to market conditions and determining which trade has the greatest likelihood of being profitable.  

Keep learning and trade wisely, 

John Boyer


Market Wealth Daily