Options Trading Volatility

When trading options, one of the factors you must understand is the volatility of the underlying investment. One of the methods by which options are typically valued is the Black-Scholes formula, first developed in 1973. An analysis of the Black-Scholes formula reveals that the value of options is related to the amount of volatility the underlying asset has experienced over time.

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Unfortunately for most casual investors, the Black-Scholes formula requires solving a partial-differential equation akin to those found in thermodynamics. Due to the complexity, you may be tempted to skip the valuation process when deciding whether or not to engage in options trading. If you fail to account for volatility in a formal manner, however, you may end up making poor investment decisions.

Incorporate Volatility and Other Measures into Your Options Trading Strategy

The Optioneer program can assist you because:

  • The system was designed to take advantage of market indicators, such as the volatility of the investment, and provide users with summaries upon which they can act.
  • After analyzing the relevant information, our system will provide you with a measure of the risk you are undertaking and the likelihood that you will be able to profit.
  • You can rely on our system to provide you with exit points to use when trading options.

While you can use charts to see the volatility of an investment, this is not the only market indicator our program uses. With Optioneer performing the necessary analysis, you can start trading with just minutes each day. To learn more about the Optioneer program, call us at 800-845-2502 or write to us at info@optioneer.com.